Banking watchdogs across Europe have begun checking whether lenders have ties to a massive document leak from Panama that showed how offshore companies are used to stash clients' wealth.
Switzerland's financial watchdog FINMA said yesterday that banks must clamp down on money laundering, as the Geneva prosecutor opened a criminal probe.
Four decades of documents from Panamanian law firm Mossack Fonseca, which specialises in setting up offshore companies and has offices in Zurich and Geneva, showed widespread use of those instruments by banks.
Switzerland is the world's biggest international wealth management centre with around $2.5 trillion in assets.
It has taken on more wealth of late from emerging markets, from which it is harder determine the origin of assets.
Britain's Financial Conduct Authority said it has written to 20 banks and other financial firms, giving them until April 15 to spell out any involvement they have with the "Panama Papers".
HSBC, Britain's biggest bank and its affiliates created more than 2,300 shell companies with Mossack Fonseca, according to the International Consortium of Investigative Journalists.
HSBC has dismissed suggestions it used offshore structures to help clients cheat on their taxes.
Meanwhile, France's ACPR financial regulator said it has told French banks to hand over extra information about their business ties with tax havens.
German regulator BaFin is likewise probing the role of Germany's banks, a source told Reuters earlier this week.
Watchdogs in the Netherlands and Austria said earlier this week that they were looking into banks named in the papers.
The chief executive of Austria's Hypo Landesbank Vorarlberg became one of the first top bankers to quit over reports based on the data leak yesterday, though he denies his bank violated any laws or sanctions.
The "Panama Papers" investigation has exposed financial arrangements of public figures including friends of Russian President Vladimir Putin, relatives of the prime ministers of Britain, Iceland and Pakistan, and the president of Ukraine.
No US banks are among the ten banks named as the biggest creators of offshore companies for clients in the Panama Papers.
But US Senators Elizabeth Warren and Sherrod Brown yesterday urged the Treasury Department to investigate whether any US or US-linked entity was involved with Mossack Fonseca.
Branches of Swiss lenders including UBS and Credit Suisse were mentioned in the leaked documents as being among the main banks that requested offshore companies for clients.
Both banks have denied wrongdoing in connection with the practice.
Swiss financial institutions - a focal point of efforts by European governments to crack down on tax avoidance - trailed only Hong Kong in having used Mossack Fonseca, the reports have said.
FINMA said it would first check for signs of illegal activity before deciding whether to launch an investigation linked to the Panama Papers. There were a few indications that they may be relevant in Switzerland.
Geneva's prosecutor also said yesterday he had launched a criminal inquiry in connection with leaks that revealed many offshore companies set up by lawyers and institutions in the Swiss lakeside city and financial centre.
"Some information has been made public this week and the prosecutor’s office wanted to verify if this information showed anything that was against the law," a spokesman for the prosecutor said.
One prominent Geneva lawyer helped set up 136 Panama offshore companies, Swiss television has reported.
Credit Suisse CEO Tidjane said on Tuesday that his bank was after only lawful assets.
UBS said on Monday it conducted its business in full compliance with applicable law and regulations and that it had no interest in funds that are not taxed or derived from unlawful activities.
Meanwhile, Sweden's Financial Supervisory Authority (FSA) has widened its Panama Papers investigation to include all four of Sweden's major banks, a spokesman said today.
The watchdog initiated an investigation against Nordea earlier this week after media reported its involvement in the so called Panama Papers leak.
According to the reports, Nordea is the most mentioned of the Swedish banks, but Swedbank, Handelsbanken and SEB also figure in the leaked documents.
"Since the other banks are also mentioned, it is natural to include them in the investigation," FSA spokesman Peter Svensson said.
A spokesman for SEB said it was natural the FSA include them in the investigation since the bank's name was mentioned in the documents. "We don't advise customers to hide money in order to avoid tax," a SEB spokesman said.
Swedbank said they had launched an internal investigation into the matter while Handelsbanken could not be immediately reached for comment.
While setting up offshore accounts is not necessarily illegal it could be in breach of Swedish money laundering rules, rules both Nordea and Handelsbanken were found to have breached less than a year ago.