Self‐regulation in combating money laundering
| Date | 01 October 2003 |
| Pages | 355-366 |
| DOI | https://doi.org/10.1108/13685200310809671 |
| Published date | 01 October 2003 |
| Author | Nadja Capus |
| Subject Matter | Accounting & finance |
Self-Regulation in Combating Money Laundering
Nadja Capus
INTRODUCTION
The Swiss Federal Assembly enacted the Federal Law
on Combating Money Laundering in the Financial
Sector (hereinafter referred to as the `Money Laun-
dering Act' or `MLA') on 10th October, 1997,
which took eect on 1st April, 1998. The essential
elements of the law are described in the following
section. This paper particularly examines that based
on the law, so-called `self-regulating bodies' (SRBs)
must be established. SRBs were intended to assume
responsibility for controlling the ®nancial market.
They were to present an accreditation request as
well as submit regulations for approval to the Ð
also to be newly created pursuant to the MLA Ð
Money Laundering Control Authority (MLCA) of
the Federal Department of Finance (FDF). For their
part, ®nancial intermediaries were required either to
associate with an SRB or to place themselves under
the direct authority of the MLCA by 31st March,
2000.
It has turned out that the MLA cannot be imple-
mented without signi®cant diculties: neither the
type of self-regulation, the planned cooperation
between government and private players, nor the
creation of two new governmental central agencies
(in addition to the Control Authority of the FDF,
the Money Laundering Reporting Oce of the Fed-
eral Police was created) functions as anticipated by
the legislature. The deadlines mentioned above
were not met and the law has not had the intended
eect. Consequently, activities were launched that
primarily supported political interests and the
debate was shaped by personal attacks.
This paper argues that the root of the problems lies
in the construction of the MLA. The entities charged
with execution of legislation cannot always Ð at
least not exclusively Ð be held responsible for
inadequate eects of the policy or implementation
problems. Rather, responsibility lies with the
legislative guidelines. The following examines more
closely the structure chosen in the MLA, the main
element of which is the self-regulation. It is
contended that the legislature thereby introduced a
new governance model.
1
It is true that self-regulation,
or self-organisation theory, was promulgated 30
years ago at the theoretical level as an important
approach in legislating,
2
even though it is only in
the past ten years that it has actually been used.
Since then there has rarely been a new legislative pro-
ject that has not incorporated this governance model.
It can be found in laws concerning the environment
and energy, in legislation regarding products, agri-
culture, and particularly laws on ®nancial markets,
as well as consumer information laws.
3
The method of self-regulation introduced a new
concept for division of responsibility, which blurred
the dichotomy between private and public law and
changed the relationship between the state and its citi-
zens. The trend of increasing responsibility of private
actors (persons or organisations) is accompanied by a
general transformation in the relationship between
civil society and the state: it manifests itself in the
privatisation debate,
4
the demand for the acceptance
of responsibility by citizens,
5
the change from the
state's ful®lment responsibility to the warranty
responsibility.
6
The current form of crime control is
distinguished by a variety of such state-private
forms of cooperation so that, in addition to state
institutions in a variety of forms, there is an increase
in the involvement of private actors with police
surveillance and control functions.
7
These developments can be explained with the
help of the social-theoretical concept of `govern-
mentality' (gouvernementalite
Â). It is revealed that the
governance model introduced regarding the Money
Laundering Act seeks to function as `governance-at-
a-distance'. The characteristics of this model will be
described and, ®nally, the problems and dangers
connected with the unexamined acceptance of this
governance model are discussed.
THE MONEY LAUNDERING ACT
Combating money laundering
As its title states, the law seeks to combat money
laundering, in other words, to prevent the in®ltration
of money obtained through criminal activities into
the legitimate economic system. Of particular interest
in this regard is, without a doubt, the hope that
criminals will thereby be denied access to capital as
well as pro®ts, and also that the tracks of the criminal
Page 355
Journal of Money Laundering Control Ð Vol. 6 No. 4
Journalof Money Laundering Control
Vol.6, No. 4, 2003, pp. 355± 366
#HenryStewart Publications
ISSN1368-5201
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