Switzerland has mixed record in bringing financial criminals to book

In three years, the federal system has failed to secure a single conviction for money laundering swissinfo.ch

In the three years since Switzerland introduced its anti-money laundering law, it has had a mixed record in prosecuting financial crimes. Experts say much of the fault lies with the para-banking sector, which is self-regulating and therefore not subject to the same degree of scrutiny as Swiss banks.

Anxious to rid itself of its image as a laundering centre for dirty money, Switzerland in 1998 implemented a comprehensive system of checks and balances to combat financial crime.

Three years on, some cantonal prosecutors have chalked up an impressive number of successes – since 1998 they have secured 213 convictions relating to dubious transactions.

But the para-banking sector, which is self-regulating, is still regarded as lax when it comes to reporting dubious transactions to the relevant federal authority, the Money Laundering Reporting Office.

“This self-regulation regime of the para-banking sector has caused a lot of hiccups,” says Pieth, who is also professor of criminal law at Basel University. “There is a deficit of para-banks under surveillance and they don’t seem very interested in reporting suspicious cases.”

Data from the Reporting Office would appear to back this up. In its third annual report, released this month, it said that while the banks had a good record of reporting suspicious transactions, the para-banking sector was still dragging its feet.

Only a quarter of cases handled by the Reporting Office last year came from the para-banking sector, although this was a 10 per cent improvement on the previous year.

Internal disputes

Part of the problem may be because the office responsible for dealing with that sector – the Money Laundering Control Authority – has been beset by internal disputes.

In June, its director, Niklaus Huber, resigned in protest at what he said was the lack of support from the Swiss finance ministry. His departure came in the wake of rumours that the authority was cash-starved, understaffed and increasingly at odds with its paymasters in government.

The Money Laundering Reporting Office, which processes reports of suspicious transactions from both banks and the para-banking sector, has had its share of problems, too. Four of its staff have resigned in the past year, with one senior official, Daniel Thelesklaf, saying he had insufficient powers to fight financial crime.

However, his successor, Judith Voney, is upbeat about the progress the office has made. “We are investigating suspicious cases and the fact that we can forward them to the investigating authorities is a success in itself.”

She says that about 100 cases forwarded to the relevant cantonal prosecuting authorities had been dropped, and “another 400 cases are still open, which means we haven’t been informed of any judgement by the prosecuting authorities”.

James Nason of the Swiss Bankers Association agrees that the Reporting Office has mastered its brief. “The Office only sets the ball rolling,” he says. “Then they hand [cases] over to the cantonal authorities.”

Cantons ultimately responsible

Ultimately, the responsibility for prosecuting cases falls to the cantons, and according to the OECD’s Mark Pieth, they have a mixed track record in clamping down on financial crime.

“You find quite active law enforcement agencies in Geneva; relatively active ones in Zurich and theoretically active ones in [Italian-speaking] Lugano. In other places, you find some not so active people.”

He adds, though, that “they are overpowered by the sheer amount of work they’ve got”.

Nason echoes this view. He says most cases of suspected money laundering, especially those with an international dimension, are fiendishly complicated and take years to investigate.

“As the Reporting Office itself says, it’s quite difficult to get information out of some countries and that holds up the works.”

New central authority

In a bid to improve the system of combating financial crime, parliament has decided to take away the responsibility for prosecuting cases from the cantons. Instead, a new central authority, responsible for notifying, investigating and prosecuting cases of financial crime, is to be set up in the capital, Bern.

“The prospect of having a centralised unit with professionals drawn together in Bern from all levels of the police and judiciary system is the best chance of doing the best possible job,” says Pieth.

“At the moment it is very much decentralised and left to the efficiency of the local agencies,” he adds.

The agency is set to have a staff of 450 in total, and training of staff is already underway in Lucerne.

In a further effort to improve the system, Voney says a new law is set to be introduced next year that is also aimed at centralising Swiss efforts to combat money laundering, organised crime and corruption.

“Under the new law, the Federal Police Office will receive the mandate to investigate cases with an international dimension. This will allow experts with specialist know-how to be more efficient in their investigations,” Voney said.

Pieth is confident that Swiss efforts to combat money laundering will start to bear fruit. He says the shortcomings are mainly a result of teething problems, which should be overcome within the next two or three years.

by Samantha Tonkin