Switzerland needs to step up work to curb illicit financial flows, says UN expert

The Swiss Federal Government has taken steps to curb illicit financial flows over the past few years, but more remains to be done to tackle issues including an ongoing risk of money-laundering, a UN expert has said at the end of his first official visit to the country, reports UNB/AP. "Progress has been achieved, but further efforts are necessary to make sure that dirty money stemming from tax evasion and corruption is not entering the Swiss financial market," said Juan Pablo Bohoslavsky, the UN Independent Expert on foreign debt and human rights.

"Illicit financial flows undermine the rule of law and human rights. In particular, they reduce the ability of developing countries to finance essential public services, such as health care, education and basic social security schemes," he was quoted as saying in a statement UNB received on Wednesday from Geneva.

Illicit financial flows are a global problem affecting developed as well as developing countries. They are facilitated by weak institutions and lack of good governance in countries of origin and financial opacity in countries of destination.

"Despite significant efforts in adopting legislation and improving procedures to detect suspicious transactions, the risk that the Swiss financial market is used for money laundering remains," said Bohoslavsky.

"This is particularly highlighted by the involvement of several Swiss banks in the Petrobas corruption scandal and in the suspicious cash flows linked to the Malaysian sovereign fund 1MDB.

It is especially troubling that these events are not from years ago - the money was still being accepted until quite recently."

The expert underlined that criminal sanctions in Switzerland for assisting foreigners to evade taxes remained relatively weak.

"Criminal liability only arises if the tax evaded in a foreign jurisdiction exceeds 300,000 CHF," he noted. Bohoslavsky said the staffing, resources and powers of the Swiss Financial Market Supervisory Authority (FINMA) needed to be proportional to the size of the Swiss financial market, and those who infringed standards needed to be named to ensure individual corporate accountability.

"In my view there is a clear political will of the Government to return stolen assets to the legitimate owners," he added. "Since 1986, $2 billion of illicit assets belonging to authoritarian rulers have been returned. In this respect I would like to encourage other countries to follow the good example of Switzerland."

Favourable tax arrangements have made it attractive for multinational corporations to establish their headquarters in Switzerland, but have provided incentives for profit-shifting, affecting tax revenues in foreign countries, he noted.

"I call upon the Swiss authorities to carry out a social and human rights impact assessment of the proposed corporate tax reform package, which should include an analysis of how the reforms will impact on tax revenues available for the realization of economic and social rights within Switzerland and for individuals living abroad, in particular in developing countries," Bohoslavsky added.

The expert welcomed the Government's adoption of a National Action Plan for implementing the UN Guiding Principles on Business and Human Rights last December, but said the plan proposed few regulatory measures to improve business respect for human rights and no particular action points related to the Swiss financial sector.

"In my view there is a need to develop a common understanding of and more consistency in what it means to include human rights due diligence in the financial sector," the expert said.

"Discussions between major international banks, including UBS and Credit Suisse in the Thun Group are helpful in achieving this.

This should be complemented by a banking sector agreement on responsible business conduct between the Government, Swiss banks and human rights organizations.

"I welcome the fact that an increasing number of banks and pension funds in Switzerland have decided to make respect for human rights a criterion for their investment decisions and would like to encourage other institutional investors to follow this trend," the expert concluded.

Bohoslavsky, who visited the country at the invitation of the Swiss authorities, met State officials, including representatives of various Federal Departments and other public institutions.

He also held meetings with leaders in the banking, financial and trading sectors, civil society and academic experts. The meetings took place in Bern, Basel, Geneva and Zurich. His findings and key recommendations will be presented in a comprehensive report to the UN Human Rights Council in March 2018.

Switzerland needs to step up work to curb illicit financial flows, says UN expert

The Swiss Federal Government has taken steps to curb illicit financial flows over the past few years, but more remains to be done to tackle issues including an ongoing risk of money-laundering, a UN expert has said at the end of his first official visit to the country, reports UNB/AP. Progress has been achieved, but further efforts are necessary to make sure that dirty money stemming from tax evasion and corruption is not entering the Swiss financial market, said Juan Pablo Bohoslavsky, the UN Independent Expert on foreign debt and human rights. Illicit financial flows undermine the rule of law and human rights. In particular, they reduce the ability of developing countries to finance essential public services, such as health care, education and basic social security schemes, he was quoted as saying in a statement UNB received on Wednesday from Geneva. Illicit financial flows are a global problem affecting developed as well as developing countries. They are facilitated by weak institutions and lack of good governance in countries of origin and financial opacity in countries of destination. Despite significant efforts in adopting legislation and improving procedures to detect suspicious transactions, the risk that the Swiss financial market is used for money laundering remains, said Bohoslavsky. This is particularly highlighted by the involvement of several Swiss banks in the Petrobas corruption scandal and in the suspicious cash flows linked to the Malaysian sovereign fund 1MDB. It is especially troubling that these events are not from years ago - the money was still being accepted until quite recently. The expert underlined that criminal sanctions in Switzerland for assisting foreigners to evade taxes remained relatively weak. Criminal liability only arises if the tax evaded in a foreign jurisdiction exceeds 300,000 CHF, he noted. Bohoslavsky said the staffing, resources and powers of the Swiss Financial Market Supervisory Authority (FINMA) needed to be proportional to the size of the Swiss financial market, and those who infringed standards needed to be named to ensure individual corporate accountability. In my view there is a clear political will of the Government to return stolen assets to the legitimate owners, he added. Since 1986, $2 billion of illicit assets belonging to authoritarian rulers have been returned. In this respect I would like to encourage other countries to follow the good example of Switzerland. Favourable tax arrangements have made it attractive for multinational corporations to establish their headquarters in Switzerland, but have provided incentives for profit-shifting, affecting tax revenues in foreign countries, he noted. I call upon the Swiss authorities to carry out a social and human rights impact assessment of the proposed corporate tax reform package, which should include an analysis of how the reforms will impact on tax revenues available for the realization of economic and social rights within Switzerland and for individuals living abroad, in particular in developing countries, Bohoslavsky added. The expert welcomed the Governments adoption of a National Action Plan for implementing the UN Guiding Principles on Business and Human Rights last December, but said the plan proposed few regulatory measures to improve business respect for human rights and no particular action points related to the Swiss financial sector. In my view there is a need to develop a common understanding of and more consistency in what it means to include human rights due diligence in the financial sector, the expert said. Discussions between major international banks, including UBS and Credit Suisse in the Thun Group are helpful in achieving this. This should be complemented by a banking sector agreement on responsible business conduct between the Government, Swiss banks and human rights organizations. I welcome the fact that an increasing number of banks and pension funds in Switzerland have decided to make respect for human rights a criterion for their investment decisions and would like to encourage other institutional investors to follow this trend, the expert concluded. Bohoslavsky, who visited the country at the invitation of the Swiss authorities, met State officials, including representatives of various Federal Departments and other public institutions. He also held meetings with leaders in the banking, financial and trading sectors, civil society and academic experts. The meetings took place in Bern, Basel, Geneva and Zurich. His findings and key recommendations will be presented in a comprehensive report to the UN Human Rights Council in March 2018.