ZURICH: Swiss financial regulator FINMA has identified control problems at four banks following an audit of accounts held by political leaders from unstable countries that was triggered by the freezing of assets of ousted North African leaders.
An examination of 20 Swiss banks found that most had fulfilled due diligence obligations in relation to identifying potentially risky political clients and checking the origin of their assets, but deficiencies were found at four unnamed banks.
"FINMA is … stepping up the intensity of its general anti-money laundering supervision," it said in a statement. "FINMA deemed specific points of the approach adopted at four banks to be inadequate and has initiated enforcement proceedings."
The report is the latest effort by Switzerland to shed its image as a haven for ill-gotten riches. It has frozen assets of Tunisia’s former President Zine Al-Abidine Ben Ali, the late Libyan leader Muammar Qaddafi and former Egyptian President Hosni Mubarak.
FINMA said Swiss law did not prohibit business relationships with so-called "politically exposed persons" (PEPs) but required banks to treat such relationships with greater care, saying its rules go beyond international standards.
It said bank relationships with customers from states prone to corruption, political violence and human rights abuses should be subject to particularly close scrutiny, particularly when such customers wanted to invest sizable sums.
"On the basis of the preliminary investigation, FINMA has not identified any need for action in terms of anti-money laundering regulations where PEPs are concerned," it said.
Inadequate Checks
FINMA noted that 830 million Swiss francs ($925.6 million) had been frozen by the start of May, 410 million relating to Egypt, 360 million to Libya and 60 million to Tunisia.
It said its investigation had shown that assets had reached Switzerland directly from Tunisia, Egypt and Libya but also via countries like France, Britain, the United States and Italy.
It said North African assets also had been transferred from Swiss banks to banks elsewhere, particularly in France and the United States.
As part of its investigation, FINMA asked banks to provide a wide range of documents including account opening details, client correspondence, internal memos, account statements and the tools they used to identify account holders.
Problems it identified at the four banks included inadequate documentation of client relationships and insufficient attempts to establish the origin of the assets deposited or the background of larger incoming payments.
"In some instances, clarifications were carried out solely with a view to the bank’s own reputation, with little consideration being given to the risk of money laundering," the FINMA report said.
It said of a total of 29 bank relationships with risky political figures it examined, only 22 were identified as such.
It said one bank’s internal definition of a politically exposed person was too narrow, while three banks did not carry out a wide enough search when checking the identity of a potential client.
Finally, FINMA said in two cases there were indications that banks might have deliberately not treated client relationships as high risk even though they had been identified as such.
