Zurich's institutions in the new regime

Prosecutors, courts and banks

The cases described in this chapter show how often the decisive steps were taken in Zurich. The Chiasso affair was a Ticino matter in its criminal dimension, yet the management consequences, the rescue arrangements and the drafting of the 1977 agreement all took place in Zurich, where the Kreditanstalt, the Union Bank of Switzerland and the National Bank's second seat were located. The Kopp affair turned on a Zurich trading company and a Zurich lawyer. In the Marcos case, the Zurich district prosecutor and the Zurich Obergericht issued two of the decisions that led up to BGE 123 II 595. In the Montesinos case, a Zurich examining magistrate conducted the investigation, and the Zurich authorities decided on confiscation and return. The Abacha report of the Federal Banking Commission, finally, named Zurich institutions among the banks with the most serious failings.

This concentration had structural reasons. Zurich was home to the head offices of the big banks and of many private banks, which meant that the largest accounts and the most important compliance decisions were located there.

The Zurich courts contributed in a different way. Because the canton's Obergericht and its criminal chambers had to decide on the admissibility of seizures and on the surrender of documents and assets, they developed an extensive practice on the relationship between banking secrecy, mutual assistance and the rights of account holders. The Marcos decision of the Zurich Obergericht of 20 February 1997, which refused early release and was later overturned by the Federal Supreme Court, shows that the cantonal courts did not simply follow the prosecutors.¹ The friction between cantonal courts, federal authorities and foreign governments was part of the process by which Switzerland developed a coherent doctrine of asset return.

The rise of the compliance function

In the banks the new law created a profession. Before 1977 there were no compliance departments in Swiss banks in the modern sense. The legal department dealt with contracts and litigation, and the inspectorate checked internal controls. The due diligence agreement created the first recurring task that required specialised knowledge of customer identification rules. The criminal provisions of 1990 raised the stakes, because a failure to identify a beneficial owner could now lead to criminal liability for the individual employee. The Anti-Money Laundering Act of 1997 and the Banking Commission's ordinance of 2002 institutionalised the function: banks had to set up specialised money laundering units, which reported to senior management and examined unusual transactions and high-risk relationships.²

The outcome, over three decades, was one of the largest concentrations of compliance expertise in Europe. Zurich banks, insurance groups, asset managers and trading houses employ large numbers of compliance officers, anti-money-laundering analysts and sanctions specialists. Consulting firms, law firms and software companies in the city have built entire business lines around these requirements. The self-regulatory organisations with seats in Zurich train and audit their members. The universities and professional schools of the city offer specialised courses in compliance and financial crime. Questions that a single officer in a bank's legal department answered in the 1990s now involve a chain of specialists, from the first-line relationship manager to the head of financial crime compliance and the external auditor. None of this existed before 1977.

This development has an ambivalent side. The volume of rules and the cost of compliance have grown steadily, and the burden falls disproportionately on smaller institutions. Critics have also argued that a culture of formal box-ticking can replace genuine judgement about clients. The FATF's evaluation of 2016 made a related point when it found that reporting of suspicious transactions by financial institutions remained inconsistent.³ Much of the later reform of Swiss money laundering law, treated in Part I, can be read as an attempt to make the compliance apparatus more effective without making it more bureaucratic.

Switzerland under peer review

Switzerland has been evaluated by the FATF repeatedly since the 1990s. The FATF's own list of Swiss documents records a mutual evaluation report of 14 October 2005, a follow-up report of 27 November 2009, a first biennial update of 7 November 2011, the mutual evaluation report adopted in December 2016 and published on 6 December 2016, and follow-up reports of 12 February 2020 and 19 October 2023.⁴ The 2005 evaluation took place under the revised recommendations of 2003, which the FATF had expanded after the attacks of 11 September 2001 by adding special recommendations on terrorist financing.⁵ Switzerland responded by criminalising the financing of terrorism in Article 260quinquies of the Criminal Code in 2003.⁶

The 2016 evaluation assessed Switzerland under the revised Forty Recommendations of 2012. The FATF described the Swiss regime as technically robust and credited it with good results, in particular in the investigation of grand corruption cases leading to the repatriation of assets and in mutual legal assistance. It identified weaknesses in the consistency of suspicious transaction reporting, in the proportionality and deterrent effect of sanctions and in the supervision of financial groups. On technical compliance most recommendations were rated largely compliant.⁷ The positive assessment of asset recovery was a direct acknowledgement of the practice that had developed from the Marcos case onwards. It showed that the potentate funds cases, which had begun as sources of embarrassment, had become part of Switzerland's international reputation.

Notes

1. BGE 123 II 595 (above), facts. ↩
2. Federal Banking Commission, KYC working group report, June 2002 (above), on the risk-based approach, the treatment of politically exposed persons and global risk management. ↩
3. FATF, Measures to combat money laundering and the financing of terrorism and proliferation in Switzerland, mutual evaluation report adopted in December 2016, https://www.fatf-gafi.org/en/publications/mutualevaluations/documents/mer-switzerland-2016.html. ↩
4. FATF, country page “Switzerland”, https://www.fatf-gafi.org/en/countries/detail/Switzerland.html. ↩
5. FATF, “History of the FATF” (above), on the Eight Special Recommendations of 2001, the revision of 2003 and the Ninth Special Recommendation of 2004. ↩
6. PricewaterhouseCoopers AG, Bekämpfung der Geldwäscherei (above). ↩
7. FATF, mutual evaluation report on Switzerland (2016) (above). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.