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LIVING IN SWITZERLAND

OPINION: Why Switzerland is failing in its fight against money laundering

As one of the world’s largest offshore financial centres, Switzerland is a magnet for money laundering.

Swiss franc notes held against a black background
How serious of a problem is money laundering in Switzerland? Photo by Claudio Schwarz on Unsplash

Money is channelled in and out of the country at multiples of what would be the normal rate for the size of the economy. 

In the ongoing Brazilian Petrobras/Odebrecht corruption scandal alone, Swiss prosecutors froze 1,000 accounts in 40 Swiss banks worth $1.1 billion. Seizing and returning illegal assets is something the Swiss do rather well, when asked. 

But are the Swiss authorities doing everything in their power to deter economic criminals? It really doesn’t look that way. There are weaknesses all along the justice pipeline from parliament to prison, which add up to little meaningful punishment for wrongdoing. 

‘Swissleaks’: The Credit Suisse scandal explained

The verdict? Could do better.

Here are the five main failings in the Swiss fight against economic crime:

Weak laws

When Swiss parliament had the chance to close money laundering loopholes, it didn’t take it. A revision of the Anti-Money Laundering Act was approved by Swiss parliament in March of last year. The revision was a lengthy process and the government’s goal was to bring Swiss law into line with international practice. 

However, parliamentarians watered down the government’s proposed changes to the act, crucially excluding lawyers and financial advisors from the due diligence requirements. The Financial Action Task Force (FAFT), an international watchdog, had been calling for this step since 2005. 

Could the implacable resistance in Bern have anything to do with the fact that one in four members of parliament are qualified lawyers? Some Swiss media have raised the question.  

ANALYSIS: Is Switzerland actually a tax haven?

Too slow

Complex international financial investigations take time. That’s understandable. The Petrobras affair has been under investigation by Swiss prosecutors since 2014, with one conviction so far in Switzerland. 

For the few financial fraud cases that finally come before the courts, there is often a ping pong game of appeals back and forth. The result can be that justice delayed is justice denied.

François Pilet of Gotham City, a Swiss platform reporting on economic crime, tracks large and small cases on their tortuous journey through the Swiss courts. His conclusion: “By exploiting the multiple possibilities for appeal at cantonal and federal level, it is possible to delay a case by around 10 years before an eventual conviction comes into effect.”

Too soft

One of the main players responding to fraud in the Swiss financial sector is the Swiss Financial Market Supervisory Authority Finma. As an enforcer, the authority is limited in how much pain it can inflict. It does not have the power to impose fines.  

Finma oversees 29,000 institutions and products, including 17,700 financial intermediaries and 500 banks. Where Finma finds wrongdoing, its usual response is to name and shame, and restrict some activities. In some egregious cases, Finma has ordered assets to be forfeited and imposed an external auditor. But mostly, the offending bank does not face life-changing measures.  

EXPLAINED: Which banks are best for foreigners in Switzerland?

In November 2021, for example, Finma announced the conclusion of its investigation into banks connected to alleged cases of corruption linked to the Venezuelan oil company PDVSA. 

After reviewing the activities of more than 30 banks, Finma found breaches of Swiss supervisory obligations in five cases. It ultimately opened enforcement proceedings against those five banks, including Julius Baer and Credit Suisse.

These proceedings amounted to recommendations, some restrictions of activities, obligations to report on progress, and some individual staff were banned from acting in a senior role. Just one institution, CBH Bank, was forced to terminate all remaining business relationships with Venezuelan clients. Julius Baer faced a one-year acquisition ban. 

No jail time

In the rare cases where a court manages to convict an intermediary, the punishment is usually relatively meaningless – a suspended sentence. This is partly because the Swiss legal system does not have the same punishment ethos that is the norm in other countries. 

Since 2007, all prison sentences under two years are automatically suspended. Because most sentences for fraud are under two years, it means people convicted of economic crimes, which may also ruin or cost lives, will never spend a day in prison. 

At the most, they will have to pay back the money they have stolen, if they still have it. This soft approach is at odds with other European countries which have become increasingly tough on white-collar crime. 

READ MORE: Why are Americans being turned away from Swiss banks?

Honour system

In the fight against money laundering, the Swiss system relies on the banks to follow due diligence rules to determine whether a given client’s assets are legal. Banks and financial intermediaries are meant to assess their own customers and report any suspicious activity to the Money Laundering Reporting Office (MROS). 

But an oversight system based on self-regulation has obvious limitations. According to Public Eye, “the friction between a bank’s legal duties and its drive to make profit is one of the main stumbling blocks in the Swiss supervisory system”. 

More often than not, banks end up responding to reports of suspicious assets that come from outside, rather than in house – chiefly uncovered by the media or prosecutors. By the time they act, the fraud has been long-running. 

The final unseen and unspoken failing lies in the cultural legacy of banking secrecy. Part of Switzerland’s success story is the strength of its financial sector. Swiss politicians, banks, and to some extent, the public, share a sense that keeping financial matters confidential is not such a bad idea.

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LIVING IN SWITZERLAND

What you need to know when taking your clothes off in Switzerland

As you know by now, the Swiss have laws and regulations for pretty much everything — ranging from how to throw away your garbage to how to boil a lobster. But what about nudity? Here's the bare truth.

What you need to know when taking your clothes off in Switzerland

The weather is getting warmer and you may want to shed as much of your clothing as you legally can. But how much skin can you safely bare in Switzerland?

You may be surprised to learn that Switzerland’s, um, penal code does not ban public nudity — as long as it is not indecent.

Interestingly though, the term “indecent” is not clearly defined in the Swiss law, so it is open to interpretation.

Be it as it may, the subject was widely reported in the media in 2009, when residents of Appenzell Innerrhoden complained about people hiking in their mountains, wearing nothing but backpacks and hiking boots.

Their concern had nothing to do with the fact that unclothed hikers took to the mountains in the middle of a cold Alpine winter.

Rather, they disliked that the walkers passed families with children and a Christian rehabilitation facility. 

The case eventually ended up before the cantonal court, which ruled that people should cover up when walking in public places. However, this ruling applies only in Appenzell, not in the rest of the country.

Another example of the liberal attitude that reigns in much of Switzerland regarding nudity has been the Body and Freedom Festival that took place regularly in August in various Swiss cities until 2018.

The festival exposed —  literally — actors performing in the buff in the midst of crowded city streets.

During one such event that took place in Bienne, local officials not only authorised the performance, but also contributed $20,000 of public funds to it.

The only condition they made was that, for safety reasons, naked performers stay clear of traffic, so drivers wouldn’t be distracted.

READ MORE: Naked artists cause stir with Zurich street performances

What about topless bathing in public?

This practice is much more common than walking in the nude (after all, how many naked hikers have you encountered on mountain trails?)

Nothing in the federal law addresses the issue of toplessness; cantons don’t have such legislation either, leaving final decisions in this matter to individual municipalities.

It is perhaps incorrect to say that the vast majority of communes in Switzerland actually authorise topless sunbathing and swimming, but they don’t ban it either.

In fact, there is currently a motion in the parliament (because apparently MPs are not busy enough with more pressing matters) urging Swiss officials to allow toplessness on public beaches.

“Such a topless rule is absolutely necessary in Switzerland”, said Social Democratic MP Tamara Funiciello.  “Women should be able to walk around, swim, and sunbathe as they please”.

Helena Trachsel, head of the Equal Opportunities Office in the canton of Zurich, also believes that toplessness makes sense: “From an equal opportunities perspective, it is clear that the same rules apply to all genders, including women and non-binary people”, she said.

However, Martin Enz, managing director of the Association of Indoor and Outdoor Pools sees no need for action: “If a person discreetly drops their bikini top and does not show off, this is accepted in most outdoor pools. The problem tends to be men who gape”, he noted.

So when and where can you take your clothes off in Switzerland?

What is clear is that you definitely should not walk around naked anywhere in Appenzell.

As far as other cantons and or /municipalities are concerned — whether you want to hike naked in the mountains or swim topless — it’s best to check with your local authorities about what is and is not permitted in your area before you leave your house buck naked.

READ MORE: The 12 strange laws in Switzerland you need to know

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