What's a money launderer to do? If you've got millions in ill-gotten gains to stash, you'll probably want to steer clear of Swiss banks from now on.
In the latest step in a long campaign to drive out dirty money, Switzerland on May 3 abolished its most secret of accounts--the ones that permit depositors to hide their names even from their most trusted bankers by using lawyers or other agents as fronts.
After June 30, the Swiss Federal Banking Commission ruled, Swiss banks will accept, with only a few exceptions, no more "Form B" accounts. The 30,000 account holders will have until Sept. 30, 1992, to reveal their identities or close their accounts. Numbered accounts will still be allowed as long as at least two bank officers know the depositor's name. Says one senior Swiss banker: "These guys from Colombia who say they're in the coffee business and have $10 million in cash coming in every week--we don't want them."
SCANDALS. The Swiss have been acting less for domestic reasons than for international ones. With their domestic market cooling, the Swiss have invested billions of dollars in expansion abroad. The country's three big banks--Union Bank of Switzerland, Credit Suisse, and Swiss Bank--now own large brokerage houses in London and New York. They also manage hundreds of billions of dollars in corporate pension funds worldwide. Thus, the Swiss have concluded, they can no longer afford to risk retaliation by governments angered at the prospect of Swiss banks hiding dirty cash.
The Swiss move also stems from several hot-money affairs that have tarnished the country's image in recent years. In 1986, Zurich's Bank Leu found itself entangled in the Securities & Exchange Commission's insider-trading investigation of Wall Street investment banker Dennis B. Levine. In 1989, Justice Minister Elisabeth Kopp was forced to resign after allegedly tipping her husband off that the company he worked for was under investigation in a $1 billion Lebanese money-laundering scandal. She was later cleared of wrongdoing.
Since the Kopp affair, Switzerland has made insider trading and money laundering illegal. It voluntarily froze Iraqi assets and blocked the secret accounts of former Philippines dictator Ferdinand Marcos and deposed Haitian ruler Jean-Claude Duvalier. Central bank President Markus Lusser argues that refusing to adopt the same tough banking standards other countries use would be "extremely detrimental to Switzerland's international credibility."
FEWER HIDEAWAYS. Although Switzerland is no longer welcoming hot money, it's not clear the country will lose very much of its $120 billion in foreign deposits. That's because it's getting harder and harder to hide cash as bank regulators worldwide strive to harmonize accounting, capital, and disclosure rules.
Panama's banks, once a favored alternative to the Swiss for Latin American drug barons, faded out during the overthrow of General Manuel Noriega. And Austria and Hungary, which still offer secret accounts, are tightening their rules to bring them in line with European Community standards. "There's no way for a foreigner to have an account unless we know who he is," says Klaus Peschek, senior international officer for Vienna's Creditanstalt-Bankverein.
Regulators concede that there will still be havens for the most determined crooks to park their hot cash. But they are much less attractive than Switzerland once was. The tiny Pacific state of Vanuatu, for instance, has promoted itself as an island of banking secrecy. Few flight-money folks, though, have been willing to entrust their money to its obscure banks, which have been able to attract little more than $600 million in foreign cash.
Despite the Swiss moves, pressure on Switzerland and other flight-capital havens to follow the straight and narrow is hardly over. U. S. authorities are now trying to persuade Switzerland and Austria to hand over information on the accounts of suspected tax cheats. Both countries say they won't, unless prosecutors can prove massive organized fraud. Even in these new days of squeaky-clean bank morality, old habits die hard.
THE SWISS CRACKDOWN ON HOT MONEY
1986 Government freezes assets of Philippines dictator Ferdinand Marcos and Haiti's Jean-Claude Duvalier. Bank Leu gives U.S. files in Dennis Levine insider-trading case
1988 Insider trading made a crime
1990 Government freezes Iraqi assets. Money laundering made a crime. Banks told to make customers certify that their deposits aren't from proceeds of criminal activities
1991 Government abolishes secret bank accounts. Depositors with numbered accounts now must disclose their names to banks