Switzerland’s financial regulator warned the nation is “particularly exposed” to money laundering risks given its traditional role as a magnet for the world’s wealthy as well as emerging threats from blockchain and banks’ lower profit margins.
Blockchain technology may tempt banks with efficiency gains but its anonymity and transaction speed appeal to money launderers and those looking to finance terrorism, the regulator warned in its 2019 Risk Monitor report. Squeezed margins may also be pushing some banks to accept new clients who are financially appealing but hail from emerging countries that present “strong risks,” Finma said.
Working with Swiss prosecutors, Finma has investigated a number of Swiss banks which have pursued clients caught up in scandals like the 1MDB affair in Malaysia or Petrobras case in Brazil without doing the necessary compliance and due diligence work to ensure they’re not taking in dirty money. Policing the banks however is tricky.
That was underscored last week by a Swiss court’s decision to throw out a 95 million Swiss franc ($96 million) penalty Finma had imposed on Lugano-based BSI Bank over its ties to the 1MDB scandal. While BSI was responsible for “severe violations of supervisory provisions,” Finma’s methodology for calculating its penalty was “incomprehensible,” the court ruled, and kicked it back to Finma to rethink the matter.