Money laundering leaves Swiss vulnerable to overseas criticism

Money allegedly stolen by Nigeria's former Abacha regime was frozen in Switzerland swissinfo.ch

Switzerland was both praised and condemned this year over the issue of money laundering, which continues to haunt the country's banking sector.

From the start of 2000, the government and Swiss banks were at pains to convince the rest of the world that they are serious about cracking down on illicit financial dealings, and ridding Switzerland of its image as a haven for ill-gotten gains.

In January, the government froze some $645 million (SFr384 million) thought to have been salted away by the family and associates of the former Nigerian dictator, Sani Abacha.

Throughout the year, the freezing of accounts continued. In the most high-profile cases, $100 million in assets belonging to allies of the former Yugoslav president, Slobodan Milosevic was blocked, along with $50 million deposited by Peru’s former spy chief, Vladimiro Montesinos.

Money was also handed back: $66 million went to the Nigerian government, which is trying to recover $3 billion it says has been hidden in overseas banks by the Abacha regime.

And SFr10.5 million ($6.1 million) was sent back to Ukraine, after being confiscated from the former prime minister, Pavlo Lazarenko. He was believed to have embezzled billions of francs from the treasury, and last June was sentenced to 18 months in prison by a court in Geneva for money laundering.

Swiss banks also took some proactive measures to clampdown on money laundering. In October UBS and Credit Suisse were among 12 of the world’s largest banks to impose voluntary anti-money laundering guidelines, drawn up in consultation with the global anti-corruption organisation, Transparency International.

The measures were seen partly as a bid to counter allegations that banks are not doing enough to prevent dirty money from entering the global financial system.

Beyond freezing funds, the Swiss authorities also singled out banks for criticism over their handling of money from dubious sources. The most serious charges were laid against six Swiss banks – including Credit Suisse – for “violations” stemming from their dealings with the Abacha regime.

In a report in September, the Federal Banking Commission said six banks had failed to comply with rules governing “suspect transactions”. It recommended that action be taken on both a “personnel and organisational level” to address what it said were serious “violations and organisational shortcomings”.

The banks mentioned included Credit Suisse, Bank Hoffmann, Bank Leu, Credit Agricole Indosuez, Union Bancaire Priveé and MM Warburg Bank.

Credit Suisse said it had since tightened up monitoring procedures and that all personnel involved in dealings with the Abacha regime had since left the bank.

Swiss efforts to prosecute high-ranking Russian officials, suspected of money laundering, received a blow in December, when Moscow terminated a corruption inquiry involving two Swiss firms.

Russian and Swiss prosecutors were investigating allegations that the Ticino-based companies, Mabetex and Mercata, had bribed Kremlin officials to the tune of millions of dollars to secure lucrative renovation contracts in the Kremlin.

Those implicated included the former Kremlin finance chief, Pavel Borodin, and family members of the former Russian president, Boris Yeltsin. The Russians denied that their decision to close the case was politically motivated.

The Geneva prosecutor investigating the case, Bernard Bertossa, said he would decide in January whether to press ahead with the Swiss investigation.

Finally, the Swiss government’s office responsible for cracking down on illicit financial dealings became mired in problems of its own, following a series of high-profile resignations.

In November, the finance ministry said its Money Laundering Control Authority would have its status upgraded, and employ more staff to deal with a backlog of cases.

The move came three weeks after four of the Authority’s six officials announced they would quit by the end of the year. Their resignations followed several others in the justice ministry’s money laundering section.

The crisis prompted warnings that Switzerland could face renewed pressure to put its house in order. Although its is acknowledged that the country now has some of the world’s strictest anti-money laundering laws, there are concerns that these are not being properly enforced.

by Jonas Hughes