Switzerland is dealing with a number of money laundering cases that look like they involve “blatant and massive corruption” according to the head of Switzerland’s financial regulatory body, FINMA.
Speaking on Thursday in Bern, FINMA’s CEO Mark Branson said although money laundering is a global problem, Switzerland is particularly susceptible. As the largest financial centre in the world that has built a business around managing wealth for private clients, it is “naturally exposed to a greater risk” in terms of money laundering, he said.
The current Panama Papers scandal has shone a light on the easy flow of money into offshore accounts, whether this is part of a legal setup or not.
FINMA is now putting banks into categories based on how many clients they have with offshore accounts. This is an indication of “how high the bank’s money laundering risk rating is”, said Branson. There are 14 Swiss banks which currently have a red rating. “We are taking action at each of these institutions,” he said.
In terms of the type of action the regulatory body can take, measures such as three-year bans for new relationships with politically exposed persons (PEPs), the repayment of illegally generated profits, new members for the board of directors and imposing bans on senior bank managers, are all steps FINMA has ordered at banks in recent years.
In 2015, there were 29 institutions in Switzerland that were investigated on suspicion of breaking anti-money laundering rules, though not all led to the regulators taking action.
Branson also spoke about two major ongoing corruption cases involving Swiss banks – the Brazillian Petrobas scandal and the 1MDB Malaysian sovereign fund case. FINMA has investigated over 20 banks in the course of its action taken in these cases. Seven enforcement proceedings have begun against financial institutions as a result.
“There are concrete indications that the measures those banks had in place to combat money laundering were inadequate,” said Branson, adding that he was aware that problems of this nature existed in banks outside of Switzerland too. In terms of tackling the issue, Branson said it was not new regulation that was needed, but that existing rules had to be “applied systematically and consistently”.
Media driven reporting
One area that banks could improve on is timely reporting of suspicious activity, Branson added. Too often, banks wait until problems become public before alerting the authorities, he said.
"Banks must be readier to file a report as soon as they have concrete suspicions and not wait until the media has taken up the scandal," he said.
In 2014 (the latest available figures) Switzerland's Money Laundering Reporting Office (MROS) received 1,753 reports of suspicious activities - 28% of those were in response to a newspaper article.
The number of reports is increasing (up 25% on 2013), but still lags far behind the likes of Britain (350,000), Hong Kong and Singapore (30,000) where demands on reporting are more stringent.