Switzerland's Government Seeks to Increase Corporate Transparency
The Federal Palace of Switzerland, where the Federal Council meets (Wikimedia Commons).
On October 12, the Federal Council of Switzerland, the executive branch of the Swiss government, recommended that the Federal Department of Finance (FDI) draft legislation create an oversight mechanism to identify anonymous owners of Swiss-registered financial entities. With sights set on a June 2023 deadline, the FDI and Department of Justice and Police hoped the legislation will enhance transparency of the Swiss financial sector and directly combat money laundering. Possible measures include establishing a central registrar containing identifying information of financial entities and their owners, as well as investments in cooperative investigations on an international scale. However, these provisions remain vague.
Critics of the Swiss financial sector’s lack of oversight emphasize the need for international cooperation. Though the Federal Council’s recommendations address the need to comprehensively collect financial entities’ identifying information, the recommendation offers little information about the Swiss government’s intention to engage with other global actors. The United Nations Office on Drugs and Crimes emphasized a need for mutual legal cooperation between Swiss authorities and other states who may be implicated in possible money laundering schemes. This cooperation would enable criminal and civil investigations to have enhanced access to evidence.
This development comes after an October 2022 report from the Swiss Federal Audit Office (SFAO) which noted that the government of Switzerland ought to do more to combat money laundering. The report details that investigations “revealed weaknesses and, hence, financial and reputational risks for the Swiss authorities.” Furthermore, the SFAO suggested that the Swiss government should embark on a structural overhaul of the legal framework which lacks oversight into matters of money laundering.
Even greater, however, is the worldwide impact of Swiss money-laundering.The Basel Institute on Governance found that much of the weaknesses in the Swiss financial system are tied to a lack of “sufficient cooperation and political willpower.” Critics of the new Swiss proposal find that this issue is not entirely addressed within the framework provided by the Federal Council. In an article published by the International Consortium of Investigative Journalists, who led the exposé behind the Pandora Papers, the group pointed to the lack of public availability of the recommended central registrar as a flaw in the Federal Council’s proposal. The ICIJ found in the Pandora Papers investigation that Swiss wealth advisors assisted financial criminals in disguising their wealth.
One recommended approach to combating money-laundering targets the risk these advisors pose when working outside of the already relaxed financial sector. Anti-corruption watchdog Financial Action Task Force advised that the Swiss government ought to apply the same legal restrictions on lawyers, notaries, and accountants in an effort to address all actors participating in money laundering schemes. This 2020 recommendation preceded the Swiss government’s erasure of clauses addressing lawyers’ involvement in schemes following the March 2021 revision of the Anti-Money Laundering Act. This particular area is often unaddressed, but is crucial to resolving part of the financial corruption issues that remain in Switzerland. If the legislation moves forward, these legal investments and structural changes will improve the secretive reputation the Swiss Financial Sector has held for decades.