'Swiss authorities are playing catch-up on financial crime reforms'

But over recent years it has garnered a reputation for being a hub for ill-gotten gains, in large part due to the country’s perceived reluctance to take up the baton in the fight against financial crime. 

The dilatory approach of the Swiss authorities to close loopholes and keep pace with their European counterparts has only served to create the impression that the country is content to maintain the veil of secrecy over the shadowy world of corporate ownership that has been enjoyed and exploited by oligarchs and high-net-worth individuals for decades.

Of course, with an estimated $2.4tn (£1.9tn) of assets sitting in its banks, there has been very little incentive for Switzerland to catch up.  

The newly announced reforms, unveiled at the end of last month, are, however, targeted at improving transparency and implementing controls.

They also seek to shift the responsibility for that task onto the shoulders of the private sector, which will be under new duties to flag risks and bolster scrutiny of legal structures.

If enacted, the rules will make accountants, lawyers and other consultants who set up trusts or holding companies, or manage real estate deals, subject to stringent due diligence rules and reporting obligations.

Payments in cash for precious metals and gemstones would be subject to money laundering checks if they are above a value of SFr15,000 (approximately £13,000). At present, such checks are only conducted on payments above SFr100,000.

Many will view this latest development as the Swiss being motivated by the need to avoid becoming a pariah on the world stage.

There would also be a tightening of the obligations on banks, firms and service providers to assess the sanctions violation risks posed by their clients.

Following in the UK’s anti-money laundering footsteps, the Swiss government has also stated its intention to create a central register of the beneficial owners of companies and other legal bodies.

The register will be held at the Swiss Federal Department of Justice and Police, with the finance ministry conducting routine spot checks and imposing sanctions for non-compliance. 

The changes signal a positive step forward for Switzerland. Yet it is surprising that, despite being a nation drenched in wealth, it has lagged so far behind Europe in acknowledging the scale of financial crime and the need to tackle it.

That now looks set to change. But for a country whose financial and legal communities are world-renowned for their expertise in creating trusts and offshore structures for the benefit of those seeking to disguise asset ownership, there seems little or no justification for this not happening years ago. 

The timing of Switzerland’s announcement is likely to be the result of increasing pressure from Europe, which, following Russia’s invasion of Ukraine last year, has become more vociferous in its criticism of the existing Swiss regime.

In a joint letter in April this year, G7 ambassadors rebuked the Swiss government for turning a blind eye to many “loopholes” in Swiss law (and the role played by Swiss lawyers in exploiting them), which, they said, were being used to facilitate the evasion of sanctions.

This mounting pressure perhaps explains why the new reforms are the second time within just three years that Switzerland has overhauled its financial crime laws. 

Many will view this latest development as the Swiss being motivated by the need to avoid becoming a pariah on the world stage, rather than by any new-found financial principles.

Time will tell whether these reforms will have any real bite or whether they represent the Swiss simply paying lip service to the international community.

The announced reforms will now be subject to a period of consultation, during which political parties and civil groups, including banking and lawyers’ lobbyists, will be consulted – meaning there is a risk of any possible legislation being watered down.

But whatever form the reforms eventually take, they will go some way – for better or worse – towards shaping the future perception of Switzerland.

Francesca Cassidy-Taylor is a senior associate and Aziz Rahman is a senior partner at Rahman Ravelli