Global financial compliance index shows Swiss financial center remains in the top tier

On the long term the Swiss financial center’s reputation is not damaged. (iStock)


Switzerland continues to be the highest ranked financial center in the 2023 Global Financial Regulation, Transparency, and Compliance Index (GFRTCI) ahead of the UK, the US and Luxembourg, the index compiled by the Swiss Finance Institute shows. “Switzerland is not a paradise for money launderers. On the contrary, it ranks among the top ten (countries) in terms of compliance and ranks first among the leading financial centers,” said Christian Bretscher, director at the Zurich Banking Association during a webinar.


“Switzerland has made significant progress in terms of electronic data interchange (EDI) and anti-money laundering (AML). Its financial center is very different from that of the 1990’s, but it seems that the world has not taken note. Whenever there is a Hollywood movie about money laundering, Swiss banks are used as a poster child,” noted Alfred Mettler, Adjunct Professor at the Swiss Finance Institute (SFI).


Switzerland ranks eight in 2023, behind seven EU countries including Sweden, Finland, and Estonia, which aren’t global financial centers. As the table below shows, the differences in absolute terms between the countries in the top ten are tiny:

“This index is about the reputation of Switzerland as a financial center. Being highly ranked (in the GFRTCI) means that the rest of the world views us as (having a) clean and efficient banking (sector), noted Jan Langlo, director at the Association of Swiss Private Banks in Geneva. The focus needs to be on Switzerland as a leading financial center in terms of “stability, know how, quality of banking and financial privacy,“ Bretscher said.


Areas of improvement to climb in the index

To improve Switzerland’s ranking in the GFRTCI, “the most improvement potential lies in the areas of AML and exchange of information on request,” noted Assistant Professor of Banking at the University of Zurich, Christoph Basten. Switzerland faces an inherent risk linked to its business model, acknowledged Luca Soncini, board member at the Banca dello Stato del Cantone Ticino. “We are the wealth managers of the world… so far more exposed to many countries far away.”


Planned corporate ownership register set to raise Swiss ranking

The  OECD has criticized Switzerland for not tracking the ownership and identity of beneficial owners of Swiss companies as well as in other countries. The Swiss Federal Council currently prepares a law text aiming at establishing a register of beneficial owners. This draft law goes into consultation this summer, Langlo said. This move should improve Switzerland’s position in the ranking.


Credit Suisse collapse, a reputational issue, has no impact on GFRTCI

The demise of Credit Suisse back in March affects the perception of Switzerland,  but the Basel regulations and the Swiss finish rules worked, the experts agreed. “It could have happened elsewhere, supposing another country had such big banks. It was not a matter of missing regulation, but (a crisis) triggered by a loss of confidence – a bank run... You can regulate as much as you want, it wouldn’t have changed the outcome,” Langlo said. “The international impact is not as big as we feel here in Switzerland and long term the Swiss financial center isn’t as damaged as we (Swiss) think,” Bretscher concluded. 


GFRTCI index

The Global Financial Regulation, Transparency, and Compliance Index (GFRTCI) covers 31 countries, which are both members of the Organization for Economic Co-operation and Development (OECD) and the Basel Committee on Banking Supervision (BCBC). This for instance means that Singapore, a leading financial center, is not included in the index despite its representation at the BCBC, given the island nation is not an OECD member. An index covering all states is not possible to compile, notably due to the lack of comparable data.

The GFRTCI is composed of seven subindices out of which three focus on regulations and their implementation, and the remaining four on the political environment such as the perception of corruption, judicial effectiveness, and business freedom. The index is updated on an annual basis by the Swiss Finance Institute (SFI), which has been compiling the GFRTCI since 2020.

See the full report: Swiss Finance Institute : Updated Global Financial Regulation, Transparency, and Compliance Index (GFRTCI)