U.S. Openness Rollback Threatens Global Anti-Money Laundering Efforts
Switzerland’s efforts to combat financial crime face a meaningful setback as the U.S. weakens transparency laws.
April 15,2025,19:11
April 15,2025,19:11
The Swiss Crackdown on Shell Companies
For years,Switzerland has grappled with the challenge of shell companies masking illicit financial activities. A seemingly simple online search can lead to the establishment of a business address in Switzerland, without the need for a physical presence or active operations. These services,offered by companies,trustees,and law firms,provide a “representative business appearance in Switzerland with postal and package reception” for a nominal monthly fee.
This business model has proven lucrative. Public Eye, a non-governmental institution, analyzed commercial registers in 2021 and identified over 30,000 companies with no genuine business activity in the cantons of Geneva, Ticino, Freiburg, and Zug. Alarmingly, the trend is upward.
The swiss Federal Council has acknowledged the severity of the issue, stating that these “mailbox companies are used as vehicles for illegal activities that go far beyond tax offenses. They are abused to disguise assets to money laundering,terrorist financing,corruption,or circumvention of sanctions.” The circumvention of sanctions, notably those related to Russia, poses a significant challenge.
The Push for Transparency
Internationally, there’s been a concerted effort to combat the use of complex structures and shell companies to hide assets. These efforts aim to uncover the true beneficiaries behind legal entities, making it more challenging to launder money and finance illicit activities.
The financial Action Task Force (FATF), an intergovernmental organization based at the OECD in Paris, spearheads these global initiatives. The FATF evaluates it’s member states’ anti-money laundering and counter-terrorist financing efforts based on forty criteria.
A key demand from the FATF has been the implementation of transparency registers – public directories listing the beneficial owners of legal entities like companies, investment firms, and foundations.
While nearly 100 countries, including Germany, the United Kingdom, and Singapore, have established such registers, Switzerland has faced domestic opposition to the measure. Though, under increasing international pressure, particularly from the United States, Switzerland has begun to shift its stance.
Switzerland’s Response to International Pressure
The tides are turning in Switzerland. In December, the Council of States approved a draft law mandating the creation of a federal transparency register for beneficial owners. Additionally, the Federal Council proposed stricter due diligence requirements for lawyers, notaries, and trustees involved in the formation or acquisition of companies on behalf of their clients. This move comes a decade after the erosion of Swiss banking secrecy, signaling a renewed commitment to combating financial crime.
Much of this shift is attributed to external pressure, especially from the United States, which implemented its own transparency register under President Joe Biden in early 2024.
Introduced a transparency register: Joe Biden.
bild: keystone
While the law is expected to take effect next year, a significant development has cast a shadow over global anti-money laundering efforts: the United States’ reversal of course.
U.S. Reversal: A Blow to Global Transparency
In a move that has sent ripples through the international financial community, the U.S. government decided in March to suspend the Corporate Transparency Act, the very foundation of its transparency register. Former President Donald Trump had previously criticized the reporting requirements as “outrageous and invasive.” current U.S. Finance Minister Scott Bessent hailed the suspension as the “victory of common sense.”
Experts warn that this decision could severely undermine global efforts to combat money laundering,effectively providing a “gift for the mafia,” in the words of one proponent of transparency rules. By making it easier to conceal assets behind shell companies,the U.S. risks becoming a haven for illicit funds.
The FATF faces a challenging situation. The next evaluation period for the United States begins in July, presenting the organization with a difficult dilemma: downgrade the U.S. for its rollback of transparency measures, or risk alienating a major donor and influential member.
The consequences could be significant. As evidenced by the recent U.S. sanctions against members of the International Criminal Court (ICC) for issuing an arrest warrant against Israeli Prime Minister Benjamin Netanyahu, the U.S. is willing to use its power to retaliate against international bodies that cross its interests. This raises concerns about the FATF’s independence and its ability to hold powerful nations accountable.
Deregulation Trend and Potential Future Rollbacks
The suspension of the Corporate transparency Act is part of a broader trend of deregulation in the United States. The Trump administration also recently weakened the Foreign Corrupt Practices Act, a law designed to combat bribery abroad.
Observers worry that the U.S. might further erode its financial crime defenses by weakening the Bank Secrecy Act. This would effectively reinstate a form of banking secrecy, as U.S. financial institutions would no longer be required to provide certain data to authorities.
Such a move could trigger a domino effect, pressuring european nations to loosen their regulations to maintain competitiveness with the U.S. market. U.S. banks have already begun lobbying for reduced reporting requirements, such as raising the threshold for reporting cash payments from $10,000 to $100,000.
This potential weakening of regulations has direct implications for Switzerland.The Swiss Financial Market Authority (Finma) has stated unequivocally that “a reduction in threshold values for the identification obligations in cash transactions would mean weakening the money laundering self -positive in Switzerland.”
| Area | Potential Impact of U.S. Deregulation |
|---|---|
| Money Laundering | Increased risk due to easier concealment of assets. |
| Terrorist Financing | Greater difficulty in tracking and disrupting financial networks. |
| Sanctions Evasion | Enhanced ability to circumvent international sanctions. |
| global Cooperation | Weakened international efforts and potential for regulatory arbitrage. |
What are the potential consequences of the U.S. policy reversal on the global financial system?
Archyde Interview: Dr. Anya Sharma on the Impact of U.S. Openness Rollback on Global Anti-Money Laundering
Introduction
Welcome to Archyde News. Today, we delve into the complex issue of global financial clarity and the potential repercussions of the United States’ recent policy shift. We are joined by Dr. anya Sharma, a leading expert in international financial crime and a senior fellow at the Global Transparency institute.Dr. Sharma, thank you for being with us.
Dr. Sharma: Thank you for having me. It’s a crucial topic that needs attention.
The Swiss Context and Shell Companies
Archyde: Dr. Sharma, Switzerland has been a key player in combating financial crime. Could you elaborate on the challenges posed by shell companies, specifically the rise of “mailbox companies” in Switzerland?
Dr. Sharma: Certainly. Switzerland, for a long time, has been grappling with shell companies. These entities, often requiring minimal presence and offering services for setting up a registered address, have become conduits for illicit financial activities. The rise of these ‘mailbox companies’ exacerbates the problem, as they are used for everything from tax evasion to money laundering, and even the circumvention of sanctions. The Swiss Federal Council has rightly highlighted this, acknowledging the use of these entities for illegal activities far beyond mere tax offenses.
U.S.Policy Shift and Global Repercussions
Archyde: The U.S. decision to suspend the Corporate Transparency Act seems to fly in the face of global efforts. What do you see as the immediate impact of this rollback on international anti-money laundering (AML) efforts?
Dr. Sharma: The suspension is a notable blow. The U.S., with its influential role in global finance and the FATF, is essentially signaling a decreased commitment to transparency. By making it easier to conceal assets, it risks becoming a haven for illicit funds. Other nations will certainly feel the impact if the U.S. is seen undermining core anti-money laundering efforts. The FATF now faces a challenge, as the evaluation of the U.S. is pending. The consequences could be severe as the U.S. has been known to retaliate against international bodies that cross its interests.
Deregulation and the Domino Effect
Archyde: The article also points to a broader trend of deregulation in the U.S. How could weakening the Bank Secrecy Act and reducing reporting thresholds further impact this situation, and possibly influence other countries’ financial regulations?
Dr. Sharma: It’s a concerning trend. weakening the Bank Secrecy Act could essentially reintroduce a form of banking secrecy, making it harder to track the flow of money. It’s not a good look,and could establish an environment where certain individuals may take advantage.This could also create a domino effect, with pressure on other nations to loosen regulations to remain competitive with the U.S.. the Swiss Financial Market Authority’s warning regarding reduced threshold values is a clear illustration of this concern.
Looking Ahead and the Future of AML
Archyde: Looking ahead, what can be done to mitigate the risks associated with this U.S. policy reversal and, more broadly, strengthen global AML efforts?
Dr. Sharma: Enhanced international cooperation is critical. Countries committed to transparency should work together, share information beyond thier borders, implement robust due diligence protocols, and resist any pressure to relax standards. It will also be vital for the FATF to assert its independence and hold all member states accountable, regardless of their size or political influence. Increased public awareness about the dangers of financial crime is also essential. These organizations that monitor the trends and highlight the activities are important.
Concluding Questions
Archyde: Dr. Sharma,thank you for your insightful analysis. this is a complex issue with potential consequences for the entire global financial system. For our readers, what should they be most concerned about moving forward regarding this U.S. policy shift?
Dr.Sharma: Be concerned for your financial well-being. This policy shift effectively provides a path for bad actors to flourish. Everyone has a stake in stopping them.
