Supervisory Board for the Due Diligence Agreement: Work Report 2001 - 2005

Basel, 21 October 2005 – In the period under review the independent Supervisory Board monitoring compliance with the Swiss Bankers Association’s Due Diligence Agreement reached condemnatory decisions in 71 out of 82 cases. Most of the condemnations concerned breaches of the duty to verify the identity of a customer and to establish the identity of the beneficial owner of assets. The total amount of fines imposed exceeded those of the previous period.

The Work Report just published by the Supervisory Board for the Due Diligence Agreement covers decisions made during the period from 1 July 2001 to 30 April 2005.

In the period under review the Board judged a total of 82 cases. Of these, proceedings were dropped in only 11 cases. In the remaining 71 cases the Board reached decisions that condemned the banks involved. Increasingly strict control mechanisms have resulted in more cases having to be judged compared with the previous period. The majority of condemnations concerned failures in connection with the duty to identify the contracting party and to establish the identity of the beneficial owner of assets. There was a concentration of cases involving domiciliary companies. In a total of 36 cases the procedures laid down in the Due Diligence Agreement governing starting a business relationship with a domiciliary company were not adhered to.

Unlike previous versions, the 6th version of the Due Diligence Agreement that came into force on 1 July 2003 introduced, amongst other things, the concept of „gross negligence“. Many cases involved disagreements regarding the interpretation of this concept. Another common issue concerned the question of who is authorised to sign the so-called “Form A” which establishes the identity of the beneficial owner of assets.

Any bank seriously violating the Due Diligence Agreement faces fines of up to CHF 10 million. By comparison the maximum fine under the Money Laundering Act is CHF 200,000.

As in the previous period, the Board did not have to impose fines at the top of the range available. However, an increase in the level of fines was recorded. Whereas the previous period saw only 31 fines that exceeded CHF 10,000, the corresponding figure for the current period under review was 58. The highest fine imposed during the period under review was CHF 750,000. The total sum of fines imposed amounted to about CHF 7 million. After the costs of the proceedings have been deducted, the money remaining from these fines is given exclusively to the International Committee of the Red Cross.


Information about the Supervisory Board
The Agreement on the Swiss banks' code of conduct with regard to the exercise of due diligence (Due Diligence Agreement) is a multilateral agreement between the Swiss Bankers Association (SBA) and banks domiciled in Switzerland. By signing the Agreement banks place themselves under an obligation to the SBA to identify their contracting partners and, in cases of doubt, to obtain a declaration as to the identity of the beneficial owner of the deposited assets. The banks also place themselves under an obligation not to provide any active assistance in the flight of capital or tax evasion.
The original Agreement dates from 1 July 1977 and it has been revised five times since then. The Agreement currently in force came into effect on 1 July 2003.
Compliance with the Agreement is monitored by a Supervisory Board. This Board consists of five independent people who are elected by the SBA for a term of five years. The Board is chaired by Dr. Jean-François Egli, a former president of the Federal Supreme Court. The Board gives judgement on cases at the request of investigators appointed by the SBA and can impose fines in cases where violation of the Agreement is established.
According to Article 14, Para. 2, the current Agreement remains in force at least until 30 June 2008. Only after that date can signatory banks withdraw from the Agreement subject to giving three months' notice. Within the framework of federal legislation against money laundering, and in particular based on Article 16 of the Federal Law on Combating Money Laundering in the Financial Sector, the Due Diligence Agreement now has the additional function of complementing the Money Laundering Guidelines of the Federal Banking Commission.


Note to journalists
For further information please contact the Secretary of the Supervisory Board: Mr. Georg Friedli, Attorney-at-Law, T +41 326 50 00 (preferably before 2.45 pm)