FINMA boss warns of rise in money laundering cases

Branson believes Swiss banks are paying more attention to the problem of money laundering Keystone

The Swiss financial system is susceptible to money laundering with the number of cases rising over the past five years, warns the head of Switzerland’s financial regulatory body, FINMA.

“The risk of money laundering in Switzerland has increased these past five years,” FINMA boss Mark Branson told the Tribune de Genève/24Heures newspaper.

But for Branson this increase in the number of cases is a positive sign that the sector is paying more attention to the problem.

“We know full well that that illegal behaviour is normally due to the client and not the bank,” he told the papers in an interview published on Thursday.

But there is a limit to FINMA’s ‘tolerance’, said Branson.

“It ends when [money laundering] alerts [to banks] have not been taken into account or when control systems have been deliberately circumvented by top managers,” he declared.

At its annual press conference in April, FINMA’s CEO said although money laundering is a global problem, Switzerland is particularly vulnerable. He called on banks to clamp down more on money laundering.

Switzerland is the world’s biggest international wealth management centre with around $2.5 trillion in assets and has taken on more wealth of late from emerging markets, from which it is harder determine the origin of assets, Branson said.

Extra effort

FINMA is putting banks into categories based on how many clients they have with offshore accounts. This is an indication of how high the bank’s money laundering risk rating is. There are 14 Swiss banks which currently have a red rating and action is being taken at each of these institutions, said Branson.

In terms of the type of action the regulatory body can take, measures such as three-year bans for new relationships with politically exposed persons (PEPs), the repayment of illegally generated profits, new members for the board of directors and imposing bans on senior bank managers, are all steps FINMA has ordered at banks in recent years.

In 2015, there were 29 institutions in Switzerland that were investigated on suspicion of breaking anti-money laundering rules, though not all led to the regulators taking action.

The Swiss authorities are involved in two major ongoing corruption cases involving Swiss banks – the Brazillian Petrobas scandal and the 1MDB Malaysian sovereign fund case.

Falcon

On October 11 the Monetary Authority of Singapore (MAS) said in a statement on Tuesday that it had ordered Falcon Private Bank’s Singapore branch to cease operating because of “a persistent and severe lack of understanding” of Singapore’s money-laundering controls. It also accused Falcon’s senior management in Switzerland and Singapore of “improper conduct”.

The MAS action against Falcon followed a similar move against Swiss-based BSI Bank’s Singapore branch in May, also for failing to control money-laundering activities connected with 1MDB.

The Swiss Federal Prosecutor’s Office announced it had opened a criminal investigation into Falcon Private Bank and its dealings. FINMA also ordered Falcon to turn over CHF2.5 million ($2.56 million) in what the watchdog said were illegal profits. It also said it had opened enforcement proceedings against two former Falcon executives, without citing them by name.