Fight against money laundering steps up a gear

As of July 1 banks will have to follow tougher regulations to improve assessment of "high-risk" customers Keystone

The Swiss Federal Banking Commission has imposed tougher regulations on financial institutions including increased surveillance of "higher-risk business relationships".

The new rules come into force on July 1.

The commission said the new regulations were in line with the directives of the Financial Action Task Force – the Paris-based organisation responsible for coordinating global efforts to stamp out money laundering.

“The ordinance follows international money laundering standards,” the Commission said in a statement.

The new measures are the latest in a series imposed in recent years amid continuing international criticism that Swiss banks are a haven for ill-gotten gains.

Brussels has also been lobbying Bern to scrap banking secrecy, claiming that it shields European tax dodgers.

The Commission added that the changes were based on “the experiences acquired” during the handling of money laundering cases linked to the late Nigerian dictator, Sani Abacha and Peru’s former intelligence chief, Vladimiro Montesinos.

High-risk clients

Under the rules, banks will have to assess their customers on the risk they pose for wrongdoing, including keeping regular tabs on “high-risk” clients, and undertaking “additional investigations” such as determining the origin of funds.

Apart from very small institutions, all banks and securities dealers must use computerised systems to monitor transactions. All cross-border wire transfers will have to contain details of the sender.

The commission reiterated that banks are prohibited from accepting any assets which it knows “or has reason to suspect are the proceeds of crime”.

Politically exposed persons

Banks have also been ordered to take extra care when dealing with money from “politically exposed persons” – such as foreign heads of state or senior officials.

“There have been some unfortunate cases where foreign heads of states have been found to be stealing for their national banks and squirreling their money away abroad not just in Switzerland, but also around the world,” said the James Nason of the Swiss Bankers Association.

The Association, which issued its own new guidelines on Friday, welcomed the government’s new rules.

“The new requirements will mean a lot of extra work and costs for the bank [but] they are prepared to pay this just to avoid any embarrassing incidents and violations of due diligence,” Nason added.

Criminal funds

The Bankers Association said the new ordinance proved demonstrated that a self-regulating banking industry can adopt “effective and tough rules for combating criminal funds”.

The Association’s new rules include obligations to keep records of a client’s date of birth and nationality. Customers will also have to prove their identity with a document, even if they are known to the bank employee – ending a long held Swiss tradition.

“Our due diligence agreement sets ‘know the your customer’ standards across the board. The banks must who they are dealing with and they must know their customers, there’s no leeway here,” said Nason.

In cases where the contracting party is a legal entity not listed on the register of companies, the person opening the account must be identified, while clients opening Internet bank accounts will have to provide a copy of their passport or identity card.

Plaudits from Washington

Despite ongoing criticism of banking secrecy rules, Switzerland has won plaudits from the United States for its efforts to track terrorist funds.

Several high-ranking US officials, including attorney general John Ashcroft, have visited Switzerland since September 11. They said last year that Swiss banking secrecy had proved no hindrance in the search for terrorist funds.

The Swiss authorities repeatedly stress that banking secrecy is waived in cases of suspected criminal activity.

On Friday, the justice ministry announced that it had handed over bank documents to US investigators in a suspected case of terrorist funding by an Islamic charity.

The case involves the transfer of $1.4 million (SFr1.9 million) from a Zurich bank to an Islamic group, Benevolence International Foundation, in Chicago, between June 2000 and September 2001.

The US has accused the group of laundering money for the militant al-Qaeda network.

The Swiss government’s new rules are part of a regular five-year review of the self-regulated due diligence agreement set up in 1977, and they replace those issued in 1998.

swissinfo with agencies

Key facts

The SFBC’s new rules come into force on July 1.
The rules require banks to assess their customers on the risks they pose.
Cross-border transfers have to include details of sender.
“Politically exposed persons” have also been deemed risky under the new rules.
The rules are part of a regular five-year review of the self-regulated due diligence agreement set up in 1977.