Blame game: potential regulatory tool?

Urs Roth has said naming banks which break the money laundering rules is a useful tool Keystone

The head of the Swiss Bankers Association, Urs Roth, has said that naming and shaming of banks that break rules against money laundering is a very useful tool for banking regulators everywhere.

With regard to Switzerland, this could help change the country’s image as a place where bank secrecy laws are exploited to hide financial crime, he said at a media briefing in Geneva.

Roth told swissinfo that he was referring in particular to potentate money, such as that of the late Nigerian leader, General Sani Abacha and his clan.

Corruption issues

The banking supervisory body in Switzerland, the Federal Banking Commission, last year singled out six banks for not showing the “necessary diligence” in accepting part of the estimated $600 million in Abacha-related funds frozen in Switzerland.

The commission named three banks of the Credit Suisse Group – Credit Suisse, Hofmann Bank, and Leu Bank – as well as Credit Agricole Indosuez, UBP Union Bank and Warburg Bank.

“It’s quite an important deterrent for regulators, not only in Switzerland but worldwide, to name and shame banks which break the rules against corruption and other financial crimes, in order to make the banks aware that their reputation is at stake. That is quite a useful tool,” he told swissinfo.

Roth, who has been Chief Executive Officer of the Association since March, also called on the government to give more details about the procedures carried out in connection with the freezing of bank accounts suspected of being related to terrorism.

He told swissinfo that some of the media had complained to him that little information had emerged from the federal authorities other than the announcement that they had frozen 24 accounts containing $12 million (SFr19.56 million).

The action was taken after names were provided by Washington in connection with the terror attacks in the United States on September 11.

Urging government disclosure

“I believe it would be useful for the government to disclose information more openly with regard to the procedures that they have set up in order to fight financial crime and to cooperate with the international community,” he said.

“On the other hand, I understand that the authorities cannot at this point disclose names and accounts because there’s a danger that if this information is disclosed, it would jeopardise the investigation,” he added.

Roth said he could not rule out that more such accounts could come to light because tracking money related to terrorism was more problematic than other forms of financial crime.

“In the usual money laundering cases, namely in drug trafficking and corruption, you have big money flows at the outset. In such cases, banks can come to the conclusion that based on what they know about the customer, these amounts simply cannot be in context with the legal business of the client,” he said.

Follow the money

“Criminal activity in these cases is often detected on the basis of the money flows.”

“But when it comes to money related to terrorism, it appears that only small amounts flow in and out of an account and that basically gives no indication of any illegal activity,” he said.

Roth repeated that Switzerland’s banking secrecy law was lifted in criminal cases, including terrorism, and was no hindrance to catching dirty money.

“Fighting financial crime effectively while respecting the privacy of honest bank customers are two things you can do at the same time,” he said.

On Monday, the New York Daily News published an editorial in which it said that Switzerland had blocked the 24 accounts last week “hoping to avoid a backlash”.

Alleged bin Laden accounts

Alleged bin Laden accounts

It added that some of Saudi dissident Osama bin Laden’s capital was “thought to be in numbered Swiss accounts”.

“This is probably a ridiculous speculation and I would not take that seriously,” Roth told swissinfo.

He also countered remarks that appeared in the newspaper referring to banking records.

The editorial said: “In the US banking system, a record exists for every money transfer. Not so in Switzerland and at least 35 other nations that give safe haven to miscreants and worse, seeking to hide or launder money or avoid paying taxes.”

Roth said the opposite was true in the case of Switzerland.

“Actually Swiss banks have records kept for 10 years which document all transactions that are being conducted in regard to an account,” he said.

by Robert Brookes with agencies