Swiss Banks at Risk of Harboring Corruption Proceeds, Says Regulator
April 07 2016 - 07:00AM
Dow Jones News
BERN, Switzerland—The head of Switzerland's financial regulator
flagged a growing risk to the country's banks of harboring the
proceeds of corruption, as they increasingly forage for wealth to
manage in emerging markets.
Mark Branson, chief executive of the Swiss Financial Market
Supervisory Authority, or Finma, noted in public remarks Thursday
that Swiss wealth managers are "increasingly accepting money from
faraway, previously less-familiar markets." That, he said, shifts
the danger for Swiss banks "away from risks connected with tax law
towards money laundering risks."
"It is often more difficult to determine the origin of money
from developing countries," Mr. Branson said.
The Finma CEO cited as examples recent cases of suspected money
laundering involving Malaysian state investment fund 1Malaysia
Development Bhd., or 1MDB, and Brazilian state-run oil firm
Petrobras.
Finma has probed more than 20 Swiss banks, and opened
enforcement proceedings against seven, related to the two cases,
Mr. Branson said. "There are concrete indications that the measures
those banks had in place to combat money laundering were
inadequate," he said.
In the case of Petrobras, one-quarter of the bank's investigated
weren't applying anti-money-laundering regulations appropriately,
Mr. Branson said.
Switzerland's Office of the Attorney General has also opened
investigations related to 1MDB and Petrobras. The Swiss attorney
general has estimated that $4 billion may have been misappropriated
from 1MDB.
The recent leak of the so-called Panama Papers, documents from a
Panamanian law firm that describe the rampant use of offshore
structures to conceal wealth for tax evasion and other wrongdoing,
"is just the latest proof of how money flows like water through
multiple jurisdictions, sometimes for legitimate purposes,
sometimes not," the Finma CEO said.
Finma has said previously it would seek to "clarify" whether
Swiss banks had deployed the offshore structures for clients in an
illegitimate way.
As authorities in Europe and the U.S. began roughly a decade ago
to crack down aggressively on Swiss banks for aiding tax evasion
among their citizens by providing accounts concealed by
Switzerland's bank secrecy laws, many banks shifted focus to
emerging markets in Asia and other regions.
Switzerland's two biggest banks, UBS Group AG and Credit Suisse
Group AG, have been at the forefront of this strategic change.
Credit Suisse's recent restructuring under CEO Tidjane Thiam
involves a stronger focus on wealth management in Asia. A separate
unit created by the bank last October is developing wealth
management in emerging markets in regions such as Latin America,
Eastern Europe, and Africa.
"We need a culture in which bank employees feel personally
committed to combating money laundering," Mr. Branson said.
More Swiss banks need to be proactive about reporting suspicious
activity, he said, with 18% of such reports based on the bank's
internal suspicions, while 28% are "in response to a newspaper
article."
Write to John Letzing at john.letzing@wsj.com
(END) Dow Jones Newswires
April 07, 2016 06:45 ET (10:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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