Swiss Attorney General’s “Proportional Method” in Money Laundering Cases: A Controversial Legal Precedent

By Julianne Smith, Financial Reporter

Switzerland, known for its robust financial system, has faced international scrutiny following a controversial legal precedent set by the Swiss Attorney General’s Office (SAG) in handling money laundering cases. In the summer of 2021, the SAG closed the Magnitsky money laundering case, discovering illicit funds totaling CHF 20 million in Swiss accounts. However, only CHF 5 million was confiscated, leading to significant controversy and criticism from various stakeholders.

Background: Swiss Efforts to Combat Money Laundering

Switzerland has made efforts to combat money laundering, with high-profile cases such as:

• The Prevezon Case in the US
• Danske Bank’s guilty plea for money laundering
• Invasive investigations into major banks like HSBC, Goldman Sachs, and Wachovia

Despite these efforts, the latest SAG decision raises concerns about Switzerland’s commitment to effectively combating money laundering.

The SAG’s ‘Proportional Method’

To justify its decision, the SAG employed a novel approach called ’the proportional method.’ This analysis suggested that only a percentage of the funds under investigation are considered criminal proceeds. However, experts argue that this method contradicts the inherent nature of money laundering, which is to obscure the origin of funds through multiple layers of transactions.

Consequences of the Proportional Method

• The Swiss Federal Criminal Court endorsed the SAG’s approach, potentially opening the door for money launderers to exploit this method
• The effectiveness of Switzerland’s anti-money laundering efforts is called into question

International Repercussions

The controversy surrounding the SAG’s approach has led to calls for international action. possible responses include:

• Evaluation by institutions like the Financial Action Task Force (FATF) and Transparency International
• Adding Switzerland to a ‘blacklist’ of high-risk jurisdictions, which could harm the country’s reputation and potentially impact its financial institutions’ ratings

Conclusion

The Swiss Attorney General’s Office’s application of the proportional method to money laundering cases has created significant controversy. Experts warn that this precedent could make it easier for money launderers to evade justice, potentially leading to an increase in money laundering through the Swiss financial system. International cooperation and actions from regulatory bodies like the FATF are crucial in addressing this issue and restoring confidence in Switzerland’s financial system.