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Swiss anti-money laundering efforts slow to bite

(Reuters) -- Swiss efforts to crack down on money laundering have got off to a slow start because of legal loopholes and an apparent reluctance of bankers to report suspect transactions, experts said on Wednesday.

This content was published on November 24, 1999 - 17:43

(Reuters) -- Swiss efforts to crack down on money laundering have got off to a slow start because of legal loopholes and an apparent reluctance of bankers to report suspect transactions, experts said on Wednesday.

Nearly 20 months after a new law was introduced obliging banks and other financial institutions to report suspicious clients and freeze their accounts, the number of tip-offs from banks remained small, legal specialists told a conference.

"...We are talking about 160 money-laundering tip-offs a year. That is tiny," said Daniel Thelesklaf, head of the Berne-based Money Laundering Reporting Office of Switzerland.

"It is clear that there are more than 160 cases out there," he told the Geneva conference on money laundering attended by legal experts, police and Interpol investigators, bank compliance officers, asset managers and lawyers.

Benoit Chappuis, the chairman of the Geneva Bar of Lawyers, said deficiencies in Swiss legislation meant that foreigners wanting to launder money could still go undetected by using a Swiss lawyer or fiduciary.

There was no government supervision over Geneva's estimated 1,000 fiduciaries -- financial trustees -- and many among the canton's more than 1,000 lawyers remained unaware of the reporting obligation under the law, he told Reuters on the sidelines of the conference.

"I can't give you guarantees that lawyers here will not cooperate with money-launderers. Swiss lawyers are becoming more cautious. But I am certain that if you have a good introduction into a little firm, you will be able to launder money," he said.

"Lawyers are not really aware of the situation. The need to inform authorities about a client is an unusual concept for our profession. It'll take years to change the mentality," he said.

"As far as fiduciaries are concerned, they will be the prime target for money-launderers because there is no surveillance. Anybody can open a fiduciary office in Geneva," Chapuis added.

In the first year of the money-laundering reporting office's operation to April 1999, tip-offs by banks led to the temporary freezing of some SFr340 million ($220 million).

But this is tiny compared to Switzerland's importance as a financial centre with a third of the global offshore banking market and an estimated $2 trillion in client assets.

By comparison, Thelesklaf's office has just three staffers and an annual budget of SFr1 million -- which analysts say raises questions about the political will of the Swiss government to combat the problem.

Low figures have also prompted analysts to wonder whether banks are willing to question rich customers about the origins of their wealth in the secretive world of private banking.

Swiss bankers assert that they have taken vigorous steps to shield themselves from the abuses of money launderers, but recent high-profile cases point to possible lapses in oversight.

Swiss private bank clients subject to money laundering probes include the brother of former Mexican President Carlos Salinas, the late dictator of Nigeria, Sani Abacha, former Pakistan Prime Minister Benazir Bhutto and her jailed husband and Ukraine's ex-prime minister Pavlo Lazarenko.

Banks have also recently frozen more than SFr20 million in Russian accounts suspected to be linked to the Bank of New York money-laundering case according to the federal police.

While the government has stepped up efforts to chase foreign money-launderers, it has not taken on a single bank so far.

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