Switzerland has one of the tightest provisions in Europe as regards the fight against money laundering.

The Swiss criminal code punishes any offense committed within the context of organized crime (money laundering, corruption, fraud, drug trafficking, gun smuggling, etc.). In the course legal proceedings, a Swiss judge can order the banks to lift bank secrecy in order to obtain information on certain accounts. Thus, bank secrecy is not an obstacle in the fight against organized crime.

To fight the abuse of the financial market place for money laundering of criminal funds, the Swiss criminal code has been revised and improved on several occasions. On 1 August 1990, Articles 305a and 305b of the criminal code entered in force.

Article 305a takes punitive action against money laundering, which is defined as any act of hindrance to the identification, search or confiscation of capital assets of criminal origin. Money laundering is punished, regardless of where the major offense took place.

Article 305b punishes the lack of vigilance in financial transactions, particularly the failure to verify the beneficial owner. Professional financial intermediaries are bound by what is referred to as the Know your customer principle, and are required without fail to identify the true owner of the funds, who is known as the beneficial owner. Negligent identification of the contracting partner or establishing the beneficial owner is punishable.

Article 305b was substantiated by a second paragraph, which entered into effect on 1 August 1994 and granted bankers and financial operators the right to transmit to the authorities any supporting information or evidence on assets that are suspected to be of criminal origin. In exercising this right, the banker no longer risks facing the consequences of violating his or her duty of confidence, at least on a criminal basis. The new 1998 Money Laundering Act transforms this right to communication into an obligation.

At the same time, the Swiss legislator improved upon these provisions by adopting a series of articles that aim to repress organized crime. Article 260b of the criminal code renders punishable any person who has participated in an organization that keeps its structure and its collaborators secret and that seeks to commit criminal acts of violence or to obtain revenue by criminal means. What is more, articles 58 to 60 of the criminal code reinforce measures relating to the confiscation of assets of unlawful origin.

Banking surveillance and self-regulation
The banking system in Switzerland assures a large part of its regulation. The Swiss Bankers Association and the Federal Banking Commission have enacted rules that must be followed by the entire banking system.

1. Code of Due Diligence
The banks are also subject to self-regulation rules issued by the Swiss Bankers Association (SBA), notably the "Agreement on the Swiss banks' code of conduct with regard to the exercise of due diligence when accepting deposits and upholding bank secrecy" of 1 July 1977.

This agreement primarily concerns ethical issues, with a view to ensuring banking activity management that is beyond reproach. It also provides for the appointment of a Supervisory Board in charge of curbing violations to the agreement. It binds the Swiss Bankers Association and the signatory banks.

This agreement establishes in particular the duty to identify the contracting partner or the beneficial owner, in the case that they are not the same person, and prohibits anyone from actively assisting in capital flight and in ploys that aim to deceive the Swiss or foreign authorities (tax, customs, legal, etc.).

Compliance with the Code of Conduct is guaranteed by bank auditing firms, who notify the Federal Banking Commission (FBC) and the Supervisory Board of any offense that has been reported or that is legitimately suspect. The Supervisory Board can issue a financial penalty of up to 10 million Swiss francs. Over the years, the Code of Conduct on due diligence has become an extremely effective surveillance instrument. The FBC considers that compliance with this code of conduct is the minimum standard for fulfilling the condition of guaranteed irreproachable activity.

The Banking Act has instituted an independent supervisory authority called the Federal Banking Commission (FBC). Upon request, it grants the authorization to practice a banking activity once the all the conditions have been met. One of these conditions is the guarantee of banking activity that is beyond reproach. At any time the FBC can verify whether a bank still meets the conditions and, if this is not the case, it can withdraw the authorization.

2. Money laundering policy
The FBC has developed a policy regulating the duties of banks and traders in securities when accepting capital assets. In particular, it enacted the "Policy on the prevention and fight against money laundering". The policy provides elements for interpreting the criminal code; it gives concrete expression to the standards that the banks and the traders in securities must respect with regard to the guarantee of irreproachable activity as defined by the Banking Act.

The organizational requirements oblige banks and traders in securities to enact an internal policy, to train personnel and to implement a special anti-money laundering unit. Reference is made to the bankers' Code of Conduct for verifying the identity of the contracting partner and of the beneficial owner.

In the event of an unusual transaction, of a higher amount, or if there are signs that point to possible money laundering, additional inquiries must be made. A list of indications of money laundering helps to create employee awareness on the issue. Special care must be taken with funds that are known or presumed to come from the corruption or the abuse of public property, particularly for funds of people who exercise important official duties abroad or in firms with which they have close ties. Entering into business relations with such people must be the result of a decision made by the management.

Regulating the financial sector
Until now, only the banks were subject to the Code of Conduct on due diligence and the money laundering policy. The "Federal Act on the prevention of money laundering in the financial sector"(MLA), entered into effect on 1 April 1998 and applies the same principles to the entire financial sector.

This act serves as a supplement to the provisions of the criminal code. It applies equally to all financial intermediaries, i.e. any person who, on a professional basis, accepts, maintains deposit of or helps to invest or transfer assets belonging to a third party (e.g.: banks, fiduciaries, wealth managers, traders in securities, funds directorates, lawyers and notaries, the post office or the Swiss Federal Railways and change bureaus).

The act imposes on financial intermediaries new organizational duties (training personnel, internal controls) and policy duties (verify identity of the contracting partner, verify beneficial owner, even clarification of the economic background of a transaction that shows signs of laundering, retaining documents attesting to the verifications made).

In accordance with this law, all financial intermediaries are henceforth obliged to inform the Federal Reporting Office for Money Laundering when, in a business relationship, they know or presume, on the basis of sound evidence, that money laundering is taking place. This office is attached to the Federal Office for Police.

Since the first year the Money Laundering Act has been enforced, 80% of the 210 declarations recorded were made on behalf of banks. Cantonal investigations are currently underway in 161 of the cases. In total, 423 million Swiss francs have been frozen.

Central Offices for Criminal Police
In 1994, the Central Offices for Criminal Police were formed within the Federal Office for Police. They are assigned to lead investigations on narcotics trafficking and counterfeiting, to coordinate Swiss and foreign investigation procedures, as well as to assess all information relative to organized crime.

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