Swiss financial sector to face new pressure

There is growing concern about Switzerland's ability to crack down on money laundering, following a wave of resignations at the offices set up to try to halt flows of dirty money.

This content was published on November 7, 2000 - 17:56

A Swiss official for the Organisation for Economic Co-operation and Development (OECD), Mark Pieth, warned that Switzerland would come under renewed international pressure unless it could stop the haemorrhage and ensure all financial institutions comply with the rules.

Pieth, who is chairman of the anti-corruption working group at the OECD, says the difficulties go further than the Swiss authorities are willing to admit.

In the space of a few months, the two main bodies responsible for fighting money laundering - a special watchdog and the Money Laundering Control Authority - have been hit by a series of resignations.

At the weekend, four of the finance ministry's six officials charged with combating money laundering within financial institutions, said they would quit at the end of November or December.

"If both pillars of the money laundering law are falling down at practically the same time, then it cannot just be about personal problems. There must be structural questions," Pieth told swissinfo.

Switzerland's efforts to crack down on money laundering have received widespread international praise. Pieth, a notorious critic of Swiss banks in the past, says they have made strenuous efforts to come into line with tightened controls in recent years.

But he said there was still a problem with the "para-banking" sector, which includes fiduciaries, exchange bureaus and raw material dealers, who regulate themselves rather than being controlled by the state.

Although a supervisory agency has been created to step in when self-regulation fails, Pieth says it is not very effective. "Many of these para-bankers have been very hesitant to join the supervisory agency, and they number a few thousand professionals who actually had to realise that they were para-bankers in the first place."

Pieth believes there are loopholes in implementing the Swiss money laundering law, but loss of reputation is the biggest stick to chide those who fail to comply.

"I believe that in the legal profession, it is possible to create a culture of awareness," Pieth told swissinfo. "I think that these people who are resisting have to realise that they have a choice between being state-regulated or being driven out of business."

He said that at present, "we look as strong as Liechtenstein" as far as regulation of this sector is concerned, that Switzerland could face the same sort of international pressure as its neighbour. Liechtenstein was singled out by the OECD earlier this year as one of the most unco-operative countries in the fight against money laundering.

The problems faced by the Swiss money laundering authorities are also worrying the Swiss parliament. A key committee in the House of Representatives on Tuesday expressed its "grave concern" at the way the country's law on money laundering was being implemented.

However, it said it was premature to talk of revising the law introduced in 1998, which requires banks and other financial institutions to inform the Federal Money Laundering Reporting Office in Bern of any suspicious transactions.

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