Arab spring played a role
Numbers are impressive but it’s the criminal tales that are gripping
BERN, SWITZERLAND – Switzerland saw a 40 percent increase in 2011 in the number of suspicious activities reports (Sars) to MROS, the Money Laundering Reporting Office Switzerland, the federal office shows in its annual report published Monday 14 May.
Banks and other financial groups, required by law to report suspicious activity, filed 1,625 Sars in 2011. Of these, 91 percent were forwarded after “careful analysis” to judicial authorities, federal or cantonal, for prosecution. The total asset value was more than CHF3 billion, greater than the combined value of Sars from 2009 and 2010 and a record figure.
“In 2011, 1,625 SARs generated a total asset value of just under CHF 3.3 billion (2010: CHF850 million from 1,159 SARs),” the report notes.
Two-thirds of the reports were triggered by media reports (30 percent of information sources) combined with third party information and information from prosecuting attorneys, which “show(s) that financial intermediaries use modern resources and consult external sources in order to gather information for their inquiries, which is then evaluated and condensed into a considerable number of Sars sent to MROS”, the report indicates.
Seven cases of bribery had total assets of CHF791 million each
The huge increase underscores the continuing progress made against money laundering in Switzerland over the past 10 years but it also provides a window to some significant shifts in money laundering globally. The average asset value in 2011 was approximately CHF2 million, compared to CHF731,000 a year earlier. The sudden jump shows a small number of cases, notably bribery in the Middle East and in particular in Egypt, that involve much larger sums than the cases in 2010. Seven cases of bribery had total assets valued at CHF791m each.
Four cases of online gaming had a total assets value of CHF560m each.
Eight cases had a total asset value of nearly CHF200m each, while in 2010 none of the reported cases had a total assets value over CHF100m.
Types of crimes reported are shifting
Fraud remains the largest group of crimes reported, but the numbers are down slightly due to a change in reporting. Computer fraud, mainly phishing, has been retroactively put into a category of its own starting with 2007. MROS says the report “shows that ‘phishing’ remains a topical subject and that financial intermediaries consistently report the account details of financial agents or ‘money mules’ to MROS”.
A second group, money laundering, consists of activities that are not technically money laundering crimes “despite the fact that the modus operandi suggested acts of money laundering. The increase is due not only to one reported case involving numerous business connections, but also to the general increase in the number of SARs in 2011.”
The drugs category consists of reports linked to “the street sale of drugs by nationals of sub-Saharan African states and the financial transactions associated therewith (money exchange, money transmitting)”.
The number of financial institutions’ clients who are African has been rising steadily as the number of drug-related money laundering cases rises, up from 32 in 2009 to 161 reported cases just two years later.
“The significant increase in the category bribery [from 60 to 158 cases reported] can be partly explained by the political events surrounding the Arab Spring and the subsequent submission of SARs. These events also had an influence on the category embezzlement, since embezzling public funds and corruption are typical offences committed by the ruling authoritarian elite.”
Egypt alone accounted for 37 reported cases of suspected bribery.
Reports linked to Tunisia were mainly money laundering cases.
All the cases reported in the pie chart at left were the result of the Swiss Federal Council’s emergency regulations to block funds. There were no reports from these countries in 2010.
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The reports were filed mainly by banks, but they also come from casinos, foreign exchange traders, securities traders, loan financing and leasing companies, credit card companies, attorneys, asset manages and insurance companies, among others.
The case studies provided by MROS draw a clearer picture than the statistics of how many paths are used to launder money.
They include payments to migrant smugglers; an online pre-paid card issuer without a permit who hadn’t taken precautions to avoid clients’ accounts being phished; a 95-year-old widow’s fortune being milked by those around her in a classic case of “unscrupulous characters”; a client who returned 10 years later to reclaim a large sum of cash in a safe in a bank where his account had been in the red the whole time and he was not contactable; and a fake painting being used as collateral for a private CHF300,000 loan.
- bogus checks made out from a foreign law firm supposedly representing a client and expediting a business transaction, to a Swiss law firm
- a woman who could not explain credibly why or how her husband and father were giving her tens of thousands of francs to invest, and who said her husband was planning to loan her considerably more money, did not want her husband, who lived abroad, sent any information about the account; the financial adviser, becoming suspicious, investigated and discovered the husband was suspected of criminal involvement some years ago in a very large real estate deal
- “In early 2011, a foreign client received a wire transfer of USD 300,000 on behalf of a law firm in his home country” and the bank’s compliance department asked for clarification about the source, but receiving little information it ran a search. “Additional searches of public sources revealed that the law firm in question had been involved in criminal activities such as misappropriation of public funds in the client’s home country. In addition, the owner of the law firm was a close legal representative of the president of the client’s home country.” In this case, the research did not immediately turn up more but “Certain statements made by the client also indicated that some of the deposited funds might actually have been derived from influence peddling. An SAR was therefore submitted to MROS. However, examination of police and judicial records and subsequent investigation of the persons named in the SAR did not reveal any relevant details. For motives of convenience, a decision was reached not to contact the FIU in the client’s home country but rather to forward the SAR to the Office of the Attorney General of Switzerland.”
- A money transmitter became suspicious because a client had transferred CHF 100,000 to several African countries, broken down into about 200 transactions to nearly 30 people. The report filed was eventually linked to suspicions about human trafficking and drug dealing: the client “was suspected of smuggling asylum seekers from Africa into neighbouring countries and then forcing these asylum seekers into prostitution”. The client’s car was caught by Swiss border guards with tens of thousands of francs under the passenger seat and no credible explanation for their source.
- identity theft where bank documents were stolen from a mailbox and used with a fake Swiss ID notarized by a non-existant notary to open an account, obtain a loan and then put that money into travel cash cards that were used to get cash from bank machines
- Payoffs in South America: “The financial intermediary became aware of an article in the foreign press implicating some of his clients in a case involving corruption of South American officials and international money laundering. The economic beneficiary of the account had received commissions from a foreign company involved in the supply of electrical equipment. The commissions were intended as kickbacks to South American public officials so that they would award contracts to the foreign company for work on behalf of a state-run power company. The financial intermediary suspected that the account opened in the name of an
offshore company (that had also been implicated in the case) may have been used for the purposes of corruption. Analysis of the transactions carried out by the financial intermediary revealed suspicious incoming payments from various counterparties in the
energy sector. The financial intermediary began to analyse the transactions to determine whether certain public officials had derived any unwarranted gains from the offshore company‟s account. Focussing on the largest outgoing payments to South America, the
financial intermediary found several suspicious transactions to luxury yacht dealers, car dealers and real estate agents and made a connection with the aforementioned article in the foreign press. The financial intermediary requested clarification but received only a letter signed by the account holders requesting that the account be closed. A designated proxy also made several follow-up calls to ensure that the account would be closed. The SAR was forwarded to the prosecution services under suspicion of corruption, money
laundering and possible involvement in a criminal organization.”