Switzerland's financial watchdog FINMA said on Thursday that banks
must clamp down on money laundering, as the Geneva prosecutor opened
a criminal probe.
Four decades of documents from Panamanian law firm Mossack Fonseca,
which specializes in setting up offshore companies and has offices
in Zurich and Geneva, showed widespread use of those instruments by
global banks and triggered investigations across the world.
"Do I think we are where we should be in fighting misuse in the
financial system? No," FINMA Chief Executive Mark Branson told
Reuters following its annual news conference.
"We think in some ways the risks in Switzerland have risen, not
fallen, and that there is more that can be done. We don't want to
see large scandals involving Swiss banks."
Switzerland is the world's biggest international wealth management
center with around $2.5 trillion in assets and has taken on more
wealth of late from emerging markets, from which it is harder
determine the origin of assets, Branson said.
Britain's Financial Conduct Authority said on Thursday it has
written to 20 banks and other financial firms, giving them until
April 15 to spell out any involvement they have with the "Panama
HSBC, Britain's biggest bank and its affiliates created more than
2,300 shell companies with Mossack Fonseca, according to the
International Consortium of Investigative Journalists. HSBC has
dismissed suggestions it used offshore structures to help clients
cheat on their taxes.
Also on Thursday, France's ACPR financial regulator said it has told
French banks to hand over extra information about their business
ties with tax havens.
German regulator BaFin is likewise probing the role of Germany's
banks, a source told Reuters on Monday.
Watchdogs in Sweden, Netherlands and Austria said earlier this week
that they were looking into banks named in the papers.
The chief executive of Austria's Hypo Landesbank Vorarlberg became
one of the first top bankers to quit over reports based on the data
leak on Thursday, though he denies his bank violated any laws or
The "Panama Papers" investigation has exposed financial arrangements
of public figures including friends of Russian President Vladimir
Putin, relatives of the prime ministers of Britain, Iceland and
Pakistan, and the president of Ukraine.
No U.S. banks are among the 10 banks named as the biggest creators
of offshore companies for clients in the Panama Papers.
But U.S. Senators Elizabeth Warren and Sherrod Brown on Thursday
urged the Treasury Department to investigate whether any U.S. or
U.S.-linked entity was involved with Mossack Fonseca.
"As the primary agency charged with protecting the integrity of the
U.S. financial system and enforcing our laws against money
laundering and terrorist financing, we strongly urge the Treasury
Department to conduct its own inquiry into Mossack Fonseca’s
activities and its clients,” the senators, both Democrats, wrote in
a letter to Treasury Secretary Jack Lew.
The Treasury Department would not comment specifically on the
findings in the documents but a spokeswoman said that "the U.S.
government intently focuses on investigating possible illicit
activity, including violations of U.S. tax laws or sanctions, using
all sources of information, both public and non-public."
"If there has been any violation of U.S. tax law or sanctions
evasion, we will take appropriate action consistent with the
national security and foreign policy of the United States," she
The senators, both members of the Senate Banking Committee and both
proponents of stronger financial regulation, said they were
concerned "this firm may have facilitated money laundering or
terrorist financing with sanctioned persons or entities."
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Branches of Swiss lenders including UBS and Credit Suisse were
mentioned in the leaked documents as being among the main banks that
requested offshore companies for clients. Both banks have denied
wrongdoing in connection with the practice.
Swiss financial institutions -- a focal point of efforts by European
governments to crack down on tax avoidance -- trailed only Hong Kong
in having used Mossack Fonseca, the reports have said.
Branson said FINMA would first check for signs of illegal activity
before deciding whether to launch an investigation linked to the
Panama Papers. There were a few indications that they may be
relevant in Switzerland, Branson said.
Geneva's prosecutor also said on Thursday he had launched a criminal
inquiry in connection with leaks that revealed many offshore
companies set up by lawyers and institutions in the Swiss lakeside
city and financial center.
"Some information has been made public this week and the
prosecutor’s office wanted to verify if this information showed
anything that was against the law," a spokesman for the prosecutor
One prominent Geneva lawyer helped set up 136 Panama offshore
companies, Swiss television has reported.
"Yes, it is an industry with a legal dimension. I have been in this
business for 30 years and this activity was sought after by foreign
nationals. There is nothing illegal, illicit or perception of
criminality to it," another Geneva lawyer, Francois Canonica, said
on Swiss television on Wednesday night.
Canonica, a former head of the Geneva bar association, referred to a
period after the 1981 election of French President Francois
Mitterrand, which he said drove French fearful of nationalization to
place their money in offshore Swiss accounts.
Credit Suisse CEO Tidjane Thiam said on Tuesday his bank was after
only lawful assets.
UBS said on Monday it conducted its business in full compliance with
applicable law and regulations and that it had no interest in funds
that are not taxed or derived from unlawful activities.
Branson said a number of Swiss banks were implicated in a corruption
scandal surrounding Brazil's Petrobras and suspicious cash flows
linked to the Malaysian sovereign fund 1MDB.
FINMA has launched four enforcement proceedings against institutions
in the 1MDB case and three over Petrobras.
Branson said: "There are concrete indications that the measures
those banks had in place to combat money laundering were
(Additional reporting by Tom Miles in Geneva and Lisa Lambert in
Washington; Editing by Richard Balmforth and Alistair Bell)
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