UN expert: Switzerland must do more to combat ‘dirty money’

Passers-by cross Paradeplatz square in Zurich, the heart of the banking district Keystone

Despite progress in curbing illicit financial flows, Switzerland needs to do more to keep so-called ‘dirty money’ from entering its financial markets, such as tougher money laundering and tax evasion sanctions, a United Nations expert has declared. 

“In recent years the Swiss Confederation has achieved progress in curbing illicit financial flows,” Juan Pablo Bohoslavsky, the UN Independent expert on foreign debt and human rights, told the Geneva-based Human Rights Council on Wednesday. 

Good practices include the Foreign Illicit Assets Act, aimed at facilitating the freezing, confiscation and return of stolen assets from Swiss banks. Over the past 25 years, Switzerland has returned $2 billion (CHF1.88 billion), the authorities claim. 

“However, there is still a need to strengthen the accountability, regulation and supervision of the Swiss financial market to prevent adverse human rights impacts caused by illicit financial flows and to prevent that funds of illicit origin be deposited in Switzerland in the first place,” Bohoslavsky added.

Juan Pablo Bohoslavsky, United Expert on foreign debt and human rights Keystone

Recommendations 

The council had asked Bohoslavsky to examine the impact of external debt on economic and social rights. His country reportExternal link, following an official visit to Switzerland last October, included around 30 recommendations, including better due diligence, especially regarding politically exposed persons (PEPs) and high-net-worth individuals, and imposing tougher sanctions for money laundering and tax evasion. A human rights impact assessment should also be carried out for Switzerland’s proposed new corporate tax reform [Projet fiscal 17], which he claims exacerbates tax competition globally as well as between cantons. 

The Swiss financial watchdog FINMA must also be given sufficient staff, resources and powers “in proportion to the size of the Swiss financial market”, the UN expert went on. Swiss banks and institutions have around CHF6.6 trillion of assets under management and 25% of global cross-border assets. 

+ the Swiss Financial Market Supervisory Authority (FINMA) on Swiss banking culture

Institutions which fail to comply with banking regulations or which are subject to sanctions or corrective action should be identified in “public enforcement reports”, Bohoslavsky added. 

In his country report to the rights council, he underlined that risks to the Swiss financial market were still very much present, referring to the case of several Swiss banks involved in the Petrobras corruption scandal and in the suspicious cash flows linked to the Malaysian sovereign fund 1MDB. 

In reply, Swiss ambassador Valentin Zellweger told the rights council on Wednesday that Switzerland was “fully committed to the fight against money laundering and financing terrorism, combating tax evasion and illicit financial flows” and that it endeavours to implement international standards. 

Zellweger pointed out that a 2016 peer review by the Financial Action Task Force (FATF) and a recent report by the Global Forum on Transparency and Exchange of Information for Tax Purposes had given Switzerland solid marks.

“We believe that the [Bohoslavsky] report only gives a partial image of the situation and that the criticisms are not always set in their broader context,” the Swiss ambassador concluded.