As another example, many of you have probably heard of the recently passed Volcker Rule, named after another former Fed Chairman Paul Volcker. The Volcker rule can be seen as a watered down version of the Glass-Steagall Act. Recognizing that it is difficult to separate investment banks and commercial banks entirely, the Volcker Rule prohibits commercial banks from short-term proprietary trading of securities, derivatives, futures, and options on these instruments. The goal is that eliminating these risky practices will make banks safer and at the same time force them to refocus on core banking businesses which in turn should benefit consumers. Basel III and the Volcker Rule are just two examples of re-regulation. There are several others, notably the U.S. Dodd-Frank Act, the OTC derivatives markets reform, and the proposed oversight and regulation of shadow banking. Taken all together, these make a comprehensive set of regulatory reforms that will busy both regulators and financial institutions over the next several years. I would like to stress however that, for financial institutions, the compliance with the new regulations is not a one-way process, but a two-way one that you can help shape through industry consultation and collaboration with regulators. The challenges for country regulators are whether and when to adopt certain parts of international standards that may be irrelevant, too stringent, or lead to new risks for the domestic industry.
In our view, the responsibility of the banker should prevail over an automatic reporting of transactions exceeding a certain amount. Tracking down criminal money is even more difficult than identifying money laundering operations. The financing of criminal activities does not require large amounts and the ex ante identity of a criminal is not a source of pertinent information. Furthermore, funds used in the financing of terrorism, unlike cases of money laundering, very often are legally acquired. It is therefore crucial that financial intermediaries in both the banking and the non-banking sectors thoroughly verify their client relationships in order to identify suspicious circumstances. In this connection, strict observation of the “know-your-customer” principle is again of key importance. Switzerland does not hesitate to offer international co-operation in judicial matters and to block incriminated assets. Following the decision of the United Nations to apply sanctions against the Taliban regime in 1999 and 2000, we blocked a certain number of Afghan bank accounts and froze the assets belonging to persons listed by the Sanction Committee of the United Nations. To date, 76 accounts are frozen with a total of 42 million Swiss francs. In the United Kingdom and in Switzerland, the authorities and the banks themselves are fully aware of the utmost importance of successfully warding off criminal funds. We all realise that money laundering is not only morally unacceptable, but that it also clearly undermines the public’s confidence in our financial centre.