Swiss «Going Rogue» on Money Laundering Rules?

A surprising pushback to reforms of anti-money laundering laws could put Switzerland in the G7’s crosshairs again.

A package of reforms to Switzerland’s more than 20-year-old anti-money laundering laws is poised for lower chamber debate when parliament reconvenes on March 2.

The alpine nation is part of the FATF, or Financial Action Task Force, a G7 effort to fight money laundering. Switzerland spent two years on a European Union «gray» list after corporate tax avoidance schemes used by companies and wealthy individuals surfaced. The offshore haven was removed last fall.

The newest reforms are proving controversial. The FATF wants a wide swath of advisers to the financial services industry – such as lawyers, consultants, accountants, trust providers – to also be required to report suspicious transactions. This would represent a crackdown on non-banking «helpers» to crime as well as a massive expansion of due diligence required by service industries.

Luxury Vendors Rebel

Not surprisingly, Switzerland’s influential legal lobby has put up resistance to the proposal, which is backed by the Swiss government. A parliamentary committee last month narrowly voted against the tougher rules.

The resistance isn’t surprising – and it may be successful. Switzerland’s previous finance minister, Eveline Widmer-Schlumpf, wanted to tackle money laundering in venues like art galleries, jewelry, and gemstone sellers, and automobile dealerships (where cash is still widely used).

The luxury goods providers rebelled against a cap of 10,000 Swiss francs ($10,200) to raise the money-laundering alarm – successfully. Today, these vendors only have to alert officials if someone wants to spend more than 100,000 francs in cash on goods.

Dearth of Notices

Along with banks, the legal, accounting, and trust industries also have a ringside seat to money laundering: they advise on real estate purchases, manage cash accounts, set up vehicles like trusts, and act as directors of such special-purpose companies.

In 2018, Switzerland’s anti-money laundering enforcer received 30 percent more reports on suspicious activity – 6,126 in all. However, less than 3 percent of those came from the legal or «other» professions, which would include consultants, accountants, trust companies, and notaries.

Switzerland’s reluctance to include the «helpers» to the financial industry in anti-money laundering efforts doesn’t bode well for its next FATF exam. The group hasn’t scheduled Switzerland for a follow-up to its invasive 2016 exam, but it is expected sometime next year.


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