Reported by Hugo Miller

For the global wealthy with money to hide, it has long been helpful to have a Swiss company at your side. One with a nameplate, a letter-box, and no employees. 

But like banking secrecy over a decade ago, the Swiss shell-company industry is now facing a fundamental threat. In its fight against money-laundering, the government is now pursuing a draft law that would force firms to declare their true owners, and attorneys to speak up about suspect transactions. 

The changes would go some way to answering Switzerland’s international critics including the US government and the OECD, who’ve been saying for years that the country is out of step with a stronger global push to rein in tax-evasion and stem flows of dirty money. Despite the traditions of discretion and secrecy, support is building to enact such far reaching changes. 

“Banks face a duty of due diligence, so why don’t lawyers as well?” says Katia Villard, a professor of law at the University of Geneva. “Some lawyers, not all, have abused this privilege and so the law is targeting them.”

At last count, there were close to 33,000 shell companies based in Switzerland, according to a 2021 survey by NGO Public Eye. Geneva is the leading location, with an estimated one letterbox firm for every 37 citizens in the canton.

The government is targeting lawyers who help set up companies and purchase real estate for clients as being at particularly high risk of being caught up in illegal activity. The new law, if it passes, would require lawyers to report any suspicious financial transactions that they encounter to the Swiss money-laundering office. Those not following the new law in general face fines of as much as 500,000 Swiss francs ($570,730). 

But having been spared the same kind of anti-money-laundering measures that the financial sector has dealt with for years, the legal industry is readying for a fight back. Lawyers say the draft law is both guilty of over-reach and that it is vague. A potential loophole exists in the fact that the precise point at which an attorney is covered by attorney-client privilege is not defined clearly enough, they say. 

And rather than targeting just the fringe of shady lawyers, this would also encompass the regular businesses of property and M&A law, argues Miguel Oural, a partner at Lenz & Staehelin and chairman of the Geneva Bar Association.

Read full report: https://www.bloomberg.com/news/articles/2023-12-12/swiss-banking-secrecy-gone-now-reformers-are-targeting-legal-secrecy