Dirty Money Takes Caribbean Cruise

Sweeping Swiss Legislation Causes Money Launderers to Seek Sweeter Pastures


Pick up any out-of-date spy novel and you probably will find a tired stereotype of the Swiss banking system: A man with no name opens a numbered account in Zurich. He deposits millions of dollars in U.S. currency with no questions asked.

Well, it just is not that easy anymore. Most people do not realize that Switzerland abolished anonymous accounts in 1977 – more than 20 years ago. Recently, more steps have been enacted to curb the financial activity of criminals in the tiny nation.

After blistering criticism about its handling of Holocaust victims’ accounts and years of catering to unscrupulous dictators and drug dealers, the Swiss government voted to clean up its act. According to many experts, the new Swiss Money Laundering Act (MLA), which went into effect April 1998, sets an even higher standard than U.S. money laundering controls.

Recommendations from the Financial Action Task Force (FATF), a group of 28 member countries including the United States and most of Europe, set the wheels in motion for passing the Swiss MLA. FATF recommendations focused on two main objectives:

  1. To make laundering profits from drug trafficking and other serious crimes illegal in all member countries (It should be noted that fraud is not considered a serious crime in all member countries.); and
  2. To set up reporting requirements for all banks whereby legal authorities are notified of suspicious transactions or unusual operations. Banks must identify their clients by name and keep accurate records. The banks also are granted exemption from any legal or civil liability for reporting these transactions.

In Switzerland it already was a criminal offense if one failed to exercise due diligence when acting as a party to any financial transaction. This had been the law since 1990. Article 305b of the Swiss Penal Code further defines money laundering as an act that only takes place after another offense generates money. Title 18 of the U.S. Code, Section 1956 and 1957, also establishes that it is only illegal to launder the proceeds of a specified unlawful activity (SUA). Unless a case involves drug proceeds, it is almost certain that the SUA being used as the basis for a money laundering charge in the United States must have occurred in the United States. Drug cases usually can cite conspiracy being conducted inside the United States. There is no such provision under Swiss law. The underlying or prior offense could have been committed entirely outside the country.

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