Money Laundering Proving Tough Nut To Crack

Money Laundering Proving Tough Nut To Crack

Money Laundering Proving Tough Nut To Crack by Matthew Allen,

Despite a focused international crackdown lasting several years, the BSI bank scandal shows that the dirty stains of money laundering refuse to come out in the wash. BSI is accused in both Switzerland and Singapore of aiding and abetting large-scale corruption.

The Swiss bank is one of seven being investigated by the Swiss Financial Market Supervisory Authority (FINMA) on similar charges. FINMA chief executive Mark Branson warned that the “risk posed by money laundering is on the increase in Switzerland”.

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Earlier this week FINMA shut down BSI for “serious breaches of anti-money laundering regulations” relating to the Malaysian 1MDB sovereign wealth fund. But with the scandals at world football governing body FIFA and Brazil’s Petrobras energy company still ongoing, there may well be other prosecutions.

Olivier Longchamp of the Swiss anti-corruption NGO Public Eye (formerly Berne Declaration) is relieved that FINMA is showing its teeth. “It is a good signal that at last the regulator is using the sanctions it is permitted to impose by the law,” he told

But he still wants to see the Swiss authorities wield their stick against misbehaving financial institutions as strongly as the United States. “I don’t think the Swiss want to use such measures for fear of killing banks,” he said.

Implementing rules

The Swiss Bankers Association (SBA) said that anti-money laundering laws are “very strict” and “in line with international standards”.

“Any offence against these measures seriously damages the reputation of our financial centre and must be prosecuted,” said SBA spokeswoman Sindy Schmiegel Werner. “We condemn the fact that existing rules and regulations have been broken in such a serious way and we support FINMA’s stern action,” she added in relation to the BSI case.

Schmiegel Werner pointed out that reports of suspicious activity to the Swiss Money Laundering Reporting Office had increased 35% last year, a sign that banks are taking their responsibilities seriously.

But Longchamp is unconvinced by the argument, pointing out that FINMA is still having to reprimand banks for having inadequate compliance systems. “It is no good saying that Switzerland has the best anti-money laundering rules if the regulator finds so many banks failing to implement them,” he said.

Asian angle

The BSI case also shines the spotlight on Singapore where many Western banks have been setting up operations in the last decade. In 2011, tax lawyer Philip Marcovici bluntly told a Zurich banking conference that some banks were taking dirty money with them.

Five years on, Marcovici – one of the architects of Liechtenstein’s tax disclosure facility – believes tax evasion and money laundering is still a big issue.

“I do not believe BSI will be an isolated case,” he told “Despite ongoing international efforts to solve the problem, the situation is not quite as rosy as people think. We are coming into very troubled times and I think regulatory cases will continue to pop up.”

“Banking secrecy, not just in Switzerland, has created an atmosphere that has encouraged bad actions that are focused too much on what is good for the bank and not enough on what is good for society.”

Despite setting up a global system to automatically exchange tax information, the lawyer who runs the Offices of Philip Marcovici in Hong Kong, insists that there are still holes in the system. The most significant outstanding problem area, in his view, is ensuring compliance from some emerging economies that do not want to exchange information automatically.

“There are still a number of weak spots in regulation. A lot more attention still needs to be paid to the issue of assets originating from particular families in developing countries,” he said.

Swiss banking issues

There are several ongoing investigations of Swiss banks involving alleged money laundering. On May 24, the Swiss Attorney General opened criminal proceedings against BSI Bank surrounding the 1MDB Malaysian fund. The Singaporean regulators revoked BSI’s license while FINMA shut down the bank in Switzerland.

Last month, FINMA said it is investigating 20 banks in relation to 1MDB and the Brazilian Petrobras corruption scandal. Along with BSI, it has opened enforcement proceedings against six other banks.

Last November, FINMA said it had launched enforcement proceedings against three Swiss banks in relation to the Petrobras affair. The Attorney General has identified 300 accounts from 30 international banks in its Petrobras probe.

The Swiss Justice Ministry has frozen millions of dollars relating to criminal investigations of FIFA in the US and Switzerland. US prosecutors have named several Swiss banks in relation to their investigations.

Money Laundering

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