Scott Miller, the current U.S. ambassador to Switzerland, is taking an activist stance against questionable financial practices and sanctions evasion, unlike his predecessor, Edward McMullen. He emphasizes Switzerland’s need to address its role in global finance and comply more stringently with international standards. Recent sanctions against two Zurich lawyers highlight the ongoing U.S. scrutiny of Swiss financial practices, amidst concerns about unequal standards and the necessity for greater transparency and regulatory updates to prevent money laundering. The Swiss Parliament faces pressure to adopt reforms quickly.
Scott Miller, the current U.S. ambassador in Bern, is known for his assertive approach. Unlike his Republican predecessor, Edward McMullen, who focused on mediating and explaining Switzerland to his government, Miller remains the activist he was before becoming an ambassador. This Democratic supporter is now using his activism to publicly combat questionable financial practices and sanctions evasion.
“Switzerland is both a global financial center and a key component of the international sanctions regime. It needs to ensure that its legal framework is not exploited for opaque financial activities,” Miller stated this week in a media release announcing U.S. sanctions against two Zurich-based attorneys, Andres Baumgartner and Fabio Delcò.
Alarming Double Standards
Alarming Double Standards
These words evoke unsettling memories of the banking secrecy debate. Following the tax dispute with the U.S., the Swiss financial sector adopted a “white money” strategy, implementing anti-money laundering regulations and due diligence almost too zealously. Now, it is lawyers working as non-financial advisors who have raised American concerns.
What is particularly troubling is that the U.S. applies markedly different standards to Switzerland compared to its own practices. This summer, the Financial Action Task Force (FATF) of the OECD assessed compliance with global standards and concluded that Swiss legislation now meets 74% of the requirements for preventing money laundering facilitation by non-financial intermediaries. In contrast, the U.S. received a damning score of 0%.
However, this reality may not be of much help to Switzerland, as history has shown. While it might attempt to persuade the U.S. within the OECD framework to refrain from claiming exceptional status, it cannot easily dispel the justifiable frustration from the U.S. regarding certain lawyers now deemed “black sheep.”
…but Not Entirely Unwarranted Resentment
…but Not Entirely Unwarranted Resentment
The case of the two Zurich lawyers who specialize in Russian clients serves as a pertinent example. They are entitled to the presumption of innocence; however, their statements in a recent interview are openly contradictory. Claiming to have extensive knowledge of Russia and maintaining close business ties with Kremlin-affiliated bankers, they should have considered the origins of the millions held by St. Petersburg cellist Sergei Roldugin and why these funds were allegedly funneled through a complex web of companies to Panama, as indicated by the so-called “Panama Papers.” Even back then, publicly available photographs showed Putin with Roldugin as a godfather during the baptism of Putin’s daughter, Masha.
It is entirely possible that the two lawyers now under U.S. sanctions did not engage in any illicit activity in the strict legal sense and believed their work was reasonable and lawful. Yet this appears to be part of the underlying issue.
Times have changed. A transparency register for economically beneficial ownership in companies, alongside stricter due diligence requirements for non-financial intermediaries like lawyers and trust companies, has become overdue. Such measures are part of a legislative package proposed by the Swiss government to close existing regulatory gaps.
Swift, Targeted, and Unbureaucratic
Swift, Targeted, and Unbureaucratic
Within Parliament, there is resistance from legal circles. Lawyers are raising alarms about the potential erosion of attorney-client privilege and unnecessary burdens on the entire sector. While the attorney-client privilege is indeed vital, it is difficult for the layman to understand why consulting on the establishment of corporate structures should fall under the same category as defending a client in a criminal case. Bankers are also bound by banking secrecy but must rightly breach this when there are suspicions of criminal activity or money laundering.
It’s essential to maintain balance and shape due diligence requirements for non-bankers in a way that is as precise and unbureaucratic as possible. However, according to the FATF, Luxembourg has fully implemented global standards in this area, with Singapore at 98%, the UK at 97%, and Denmark at 95%. It shouldn’t be that challenging.
Instead of engaging in another exhausting battle with U.S. authorities, Parliament should take action now by swiftly approving the legislative package to effectively remove Switzerland from the firing line. Complaining achieves nothing. As a clean nation actively combating money laundering and financial crime, Switzerland need not fear international competition. Yet, it must ensure that a few “black sheep” do not drag the Swiss financial sector into a conflict it cannot hope to win.