A new study has located almost 1 million shell companies worldwide – bringing an air of suspicion to Switzerland. This is a hot topic for today’s banking center as well as for politics.
Shell companies can have entirely legal purposes. However, they can also be used as a cover for criminal schemes, such as money laundering, fraud or evading sanctions. In these cases, we are talking about shell companies in a negative sense.
The analysis service of the mighty American ratings agency Moody’s has trawled through data on no fewer than 485 million so-called letterbox companies based around the world, searching for signs of dishonest intentions, taking into account criteria such as hidden ownerships, mass registration or peculiar business figures.
Potentially 900,000 Shell Companies
In its ultimate findings, the service discovered 19 million companies globally with these signs, and 900,000 with several suspicious characteristics, or «red flags». This has emerged from the study, a «Shell Company Indicator», that Moody’s Analytics has just published.
The analysts also made some interesting findings in Switzerland. Here, there are «relevant patterns regarding atypical directorship, unequal jurisdiction risks and a significant presence of financial anomalies». These patterns indicated the possible existence of bogus companies which could facilitate the laundering of the proceeds of crime or circumvention of sanctions.
«A Serious Wake-Up-Call for Switzerland»
«For Switzerland, a leading financial center for all financial services, this is a serious wake-up call,» finds the study.
The warning may fall on sympathetic ears. Last summer, the Federal Council sent a draft bill on strengthening the fight against money laundering for a consultation process. The bill demands that the economic beneficiaries of company constructs are specified. This has not been the case before now.
Banks in Agreement With Federal Council
According to research that finews.ch engaged in recently, the banking center is in support of the Federal Council’s demands and also wishes for lawyers, notaries and trustees to be subject to the legislation in cases of particularly risky activities.
The sector is afraid of retaliatory measures from abroad. The gaps in the operative part of the legislation against money laundering are clearly a major headache for the United States in particular, and are therefore viewed as an Achilles’ heel of the financial center.
The Next Country Assessment Is Looming
The gaps are also to blame for the fact that Switzerland is lagging behind international standards when it comes to the fight against money laundering. This could have a negative impact at the next country assessments of the Financial Action Task Force (FATF) in 2027.
There is therefore a real need for action. Moody’s also had a favorable appraisal: «The reform of the anti-money laundering regulations, including the creation of a register of economic owners checked by the Swiss Federal Department is a very positive sign that the country is giving these risk factors ever more consideration.»
