Reported money laundering cases remain high

Judith Voney addressing a media conference in Bern Keystone

The total value of suspect assets reported to the Swiss Money Laundering Reporting Office (MROS) reached CHF3.15 billion ($3.3 billion) in 2012, close to the all-time high of 2011 which was driven by the financial fallout of the Arab Spring.

Unlike 2011, when CHF3.28 billion was reported, last year was not characterised by any exceptional political circumstances. But the office said it had received “more SARs [suspicious activity reports] concerning individual cases, which meant more suspected criminal activities on the whole”.

Swiss financial intermediaries – banks, the payment services sector, fiduciary and asset managers – made 1,585 suspicious activity reports to the Bern-based office last year, just 40 fewer than in 2011. Some 86 per cent of these cases were referred to the justice authorities.

Speaking at a media conference on Tuesday, MROS director Judith Voney put the high number of reports down to a high level of awareness among financial intermediaries. However, Voney told swissinfo.ch that some intermediaries were more vigilant than others.

When Voney’s office establishes that an intermediary is not passing on information on suspect assets, “we quickly get in touch with the financial regulator [Finma] to see if they are being looked into.”

“This happens on a regular basis,” Voney said, adding that it was up to Finma to take appropriate measures if an intermediary is not taking its due diligence obligations seriously.

Media influence

Of the 1,050 SARs submitted to MROS last year from the banking sector, the greatest share – 33 per cent – came from foreign-controlled banks, with major Swiss banks making up 29 per cent of reports. Seven per cent of reports came from private banks.

MROS relies on financial intermediaries to detect and report suspicious activity, but it can only analyse the reports it receives. “Of course we can’t guarantee that there is not more money of criminal origins in the Swiss financial system”, Voney said.

The main factor arousing suspicion in 2012 was media reports, accounting for 29 per cent of reporting volume. Information gleaned from third parties was the second most cited factor for arousing suspicion at 26 per cent, followed by information from prosecution authorities at 13 per cent.

Six reports received by MROS last year involved a total asset value of CHF1.44 billion. Of these, three were submitted in connection with the suspected misappropriation of foreign public funds. Voney declined to specify which country was involved, beyond saying it was in Asia. The case is currently being dealt with by the Swiss Federal Prosecutor’s Office.

Caribbean brothel case study

MROS received a record number of 19 suspicious activity reports last year in the category human trafficking/sexual offences. The annual report cites this example:

Investigating one of its clients (a former banker), a bank discovered on the Interpol website that South American prosecution authorities had issued an arrest warrant for the client in connection with alleged involvement in human trafficking, human smuggling and illegal immigration. The client’s account with the bank had indeed received deposits of several hundred thousand US dollars over a period of about a year and a half. Several of the incoming deposits lacked a clear economic background.

According to the client, these funds had come from his activity as a real estate agent. However, the client was never able to produce any contracts, documents, etc. to substantiate this claim. Additional searches over the internet revealed that the client managed a luxury brothel in the Caribbean with prostitutes from Eastern Europe and South America. Since a South American country had issued an arrest warrant for the client in connection with alleged involvement in human trafficking and human smuggling, the bank could not exclude the possibility that at least part of the funds transferred to the suspected account might be derived from criminal activities, i.e. human trafficking and human smuggling.

Further inquiries by MROS corroborated the bank’s initial suspicions. The client’s name appeared in police databases as the subject of an international arrest warrant issued by South American prosecution authorities. According to the arrest warrant, the client was a member of an international criminal organisation involved in the smuggling of women from South American countries to the Caribbean, where they were exploited in a luxury brothel.

These findings seemed to indicate that the funds deposited into the reported account may have come from criminal activities (international trafficking in human beings). The case was forwarded to the corresponding prosecution authorities, which then initiated

criminal proceedings.

Source: MROS Annual Report 2012

Terrorism

The number of reports involving terrorist financing increased from ten to 15 in 2012, with a total asset value of CHF7.47 million, considerably more than in 2011 when just CHF150,000 was at stake.

The high figure in 2012 was due to a single complex case that generated CHF7.47 million. The remaining SARs involved either no assets or assets of between a few hundred and a few thousand Swiss francs.

Of the 15 terror cases, the money sent by banks, asset managers and a money transmitter belonged to six Russians, four Swiss nationals, two Sri Lankans and one citizen each from Lebanon, Libya and Pakistan.

The clients transferring funds came from Switzerland, Cyprus, Sri Lanka and the United States, the British Virgin Islands, Libya and Pakistan. In both cases – clients and beneficial owners – the individuals’ domiciles did not necessarily match their nationality.

Stronger

In the 2012 reporting year, MROS replied to 598 inquiries from 82 countries. Voney pointed out that the changes introduced in new anti-money laundering legislation would strengthen the powers of the office.

“In concrete terms, that means we will be able to exchange information with our counterparts in other countries … and that means we can improve our analysis which is an advantage for the efficiency of the ensuing legal proceedings,” she told swissinfo.ch.

Taking a longer view of the end result of these suspicious activity reports, the conviction rate appears low. Of the 8,251 SARs forwarded to the prosecution authorities in the ten years to the end of 2012, just seven per cent resulted in a conviction in Switzerland. Some 42 per cent of cases are still pending.

In many cases judicial authorities voluntarily pass on information to foreign judicial authorities rather than initiate proceedings within Switzerland.