Money laundering in the public sector

Experience feedback from Sébastien Fanti, Lawyer


It all starts on 27 April 2021, the birthday of yours truly. To celebrate the passing of the half-century some excesses are usually tolerated. One of them is the purchase of a faster, sleeker, more exclusive car. The delivery was to take place on the day of the jubilee. Then the garage employee called me: "Mr Fanti, you have to come and pay for the change of car at the car service. So be it.


So, I interrupted what I was doing and went to the offices of the department in Sion. As the amount to be paid is communicated to me, I ask the young employee in front of me where I can pay with my card. He answers me with assurance: nowhere, here we only accept cash payments! Time is running out, the offices are about to close and I absolutely must have paid the outstanding amount to be able to receive my car. So, I go to the first ATM that comes along and withdraw the money, all as quickly as possible. When I return to the counter, I ask the young employee: what are the maximum amounts you receive at your counter in a day? He calmly replied that he had already collected several tens of thousands of francs. Seeing that I am taken aback, he tries to reassure me by adding that the money is well protected. However, this was not the point of my questioning.


A few days later, I communicated my astonishment to one of the employees of the Finance Department. He was not in the least surprised. He even went so far as to tell me that many citizens pay their taxes in cash at the counter, even magistrates. Sometimes, though rarely, tens of thousands of francs are paid in this way, without any control being carried out.


How is this possible when in our daily lives we are confronted with the practical consequences inherent in the fight against money laundering? Does the public sector lack the means to tolerate what in the banking sector would be a real heresy? Here are some explanations.


The first answer that can be given is contained in one of the many circulars issued by the Swiss Financial Market Supervisory Authority (FINMA; https://www.finma.ch/fr/): State acts, as long as they fall within the sovereignty of the State, are in principle not subject to the Federal Act on Money Laundering[1], even if the activity in question is in itself a financial intermediary activity (Circ. FINMA 2011/1 "Financial intermediary activity within the meaning of the AMLA", marginal number 133, § VII/State actions[2]; this circular is available at https://www.finma.ch/fr/~/media/finma/dokumente/dokumentencenter/myfinma/rundschreiben/finma-rs-2011-01-01-2017.pdf?la=en).


However, if the State intervenes outside its area of sovereignty, the AMLA applies.


You will agree that the distinction is not easy. That is why FINMA has tried to make it clear. The main criterion is the existence of a contract. The state can only be subject to the AMLA if it concludes contracts in the context of the activity carried out outside its area of sovereignty. It is irrelevant in this respect whether the contract is a contract under private or administrative law. Nor does it matter what organisational form the entity concerned takes. Consequently, it may be a question of private structures in charge of public service missions, by law, an act of public authority or a contract under administrative law.


It is therefore clear that an analysis must be made on a case-by-case basis. According to FINMA (§ 137 to 140), this index analysis can be undertaken based on the following elements


- An authority or organization has been entrusted with or authorized to act as a financial intermediary on the basis of an explicit legal text, an act of public authority or a contract under administrative law. It should then be checked on a case-by-case basis whether the regulatory levels and conditions of delegation have been respected.


- If there is a lack of cooperation, the authority or organization authorized to carry out the activity of financial intermediary may take appropriate measures by decision. Despite the contract, there is therefore a subordinate relationship between the authority or organization and its co-contractor.


- The financial intermediary activity carried out by an authority or organization enables the fulfilment of a task within its competence or is closely linked to such a task.


- The authority or organization carrying out the state act is subordinate to another authority as regards the auditing of accounts.


Some examples are given by the regulator:


The debt enforcement and bankruptcy offices, the special bankruptcy administration (Art. 241 of the Debt Enforcement and Bankruptcy Act (DEBA; SR 281.1), as well as the liquidators within the meaning of the DEBA (Art. 317 ff.) are not subject to the AMLA. This is also generally the case for bodies responsible for the liquidation of the estate (Art. 516 of the Swiss Civil Code), guardianships (Art. 393 ff SCC) or mandators for incapacity (Art. 360 ff SCC). Ex officio administrators of the estate (Art. 554 SCC) and executors of wills (Art. 517 ff. SCC) are also not subject to the AMLA, unless they provide financial intermediary services outside their mandate, for example by participating in the distribution of the estate.


The exercise is obviously complex and perilous, which means that it is not within the reach of the layperson.


Moreover, the gaping loophole in the fight against money laundering illustrated by the above example is surprising. It would thus be possible to launder tens of thousands of francs without any difficulty, control or traceability, even though the smallest bank in this country is overwhelmed with tasks in these matters on a daily basis?

[1] The Federal Act on Combating Money Laundering and Terrorist Financing of 10 October 1997 (RS 955.0; Anti-Money Laundering Act, hereinafter abbreviated as AMLA) ; this circular, which came into force on 1 January 2011, is intended to clarify the Money Laundering Ordinance (MLO), which is now called the Ordinance on Combating Money Laundering and the Financing of Terrorism (SR 955.01); it can be consulted at this address: https://www.fedlex.admin.ch/eli/cc/2015/791/fr [2] The purpose of this circular, which came into force on 1 January 2011, is to clarify the Anti-Money Laundering Ordinance (MLO), which is now called the Ordinance on Combating Money Laundering and Terrorist Financing (SR 955.01); it can be consulted at this address: https://www.fedlex.admin.ch/eli/cc/2015/791/fr


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