Combating money laundering Combating money laundering

The Swiss Federal Council has ratified the FDF’s draft of the Anti-Money Laundering Act (AMLA) in June 2018 and issued the corresponding draft for consultation until 21 September 2018. The planned amendments to the AMLA address above all the weaknesses identified by the Financial Action Task Force (FATF).

• Under the new regime, persons providing certain services (such as incorporating, managing or administrating companies or trusts) will have to adhere to due diligence requirements as per AMLA. These so-called service providers will be subject to be audited.
  
  
• The threshold above which traders in precious metals and gemstones must exercise due diligence regarding cash payments in accordance with the AMLA is to be lowered from CHF 100,000 to CHF 15,000.
  
  
• The revised AMLA will explicitly oblige financial intermediaries to verify the information on the beneficial owner.
  
  
• A general and explicit duty to periodically review whether client data is up-to-date is to be included in the revised AMLA. If the data is no longer current, it must be updated.
  
  
• The ambiguities in connection to the system for suspicious activity reports for money laundering and/or financing terrorism are to be resolved. The proposal is to abolish the right to report as per Art. 305ter SPC and, as a consequence, also the 20-day deadline by which the Money Laundering Reporting Office Switzerland (MROS Switzerland) is to analyze any report submitted to it.
  
  
• Associations that could be misused for terrorist financing or money laundering will have to register in the commercial register and keep a list of their members.
  
  
• Whoever buys scrap precious metals on a commercial basis will be required to hold a license and comply with certain duties of due diligence.

Expanded group of AMLA addressees: Apart from financial intermediaries and traders, the new law will create a further category, that of “service provider”, who will also be subject to the AMLA. These service providers will be subject to auditing in order to determine whether they have adhered to their duties of due diligence. Financial intermediaries working with such service providers should review them appropriately (similar as for external asset managers).

Traders dealing in precious metals and gemstones will have to exercise due diligence in accordance with AMLA for cash payments of CHF 15,000 or more. Industry representatives have complained that the implementation is challenging regarding the sale to end customers. As a result, the terms precious metals/gemstones have been circumscribed more restrictively, excluding certain products from AMLA provisions when sold to end customers.

Verifying the Information on the beneficial owner: The revised AMLA will explicitly require financial intermediaries to verify the information on the beneficial owner. Just establishing it with the necessary due diligence is no longer sufficient. From a material point of view, nothing much will change as in practice financial intermediaries already now have to unequivocally establish the background information on their clients, including the beneficial owner. Nonetheless, the practical implementation should not be underestimated, as the verification must be based on meaningful information or data from trustworthy sources.

Updating client data: The principle of a periodic review and, if necessary, updating of client data is already implicitly required by the current anti-money laundering regulations. However, the legal provisions up to now are limited to the extent that it only applies in case of doubts as to the accuracy of the information. Under the new regime, the obligation to periodically review and, if necessary, adjust client data will apply to all business relationships, regardless of their risk. The obligation will go beyond identifying the contractual party and determining the beneficial owners, and will also cover general KYC information, such as the client profile or the nature and purpose of the business relationship. Financial intermediaries will therefore have to adjust their periodic review mechanisms. They should also consider whether client data should already be updated in the course of the ongoing transaction monitoring.

Reporting regime: The parallel existence of the right to report and the duty to report has caused quite a bit of legal uncertainty among financial intermediaries. With the elimination of the right to report, only the duty to report as per Art. 9 AMLA will remain, which will certainly provide greater legal certainty. Financial intermediaries will have to interpret the term “justified suspicion” broadly. If suspicious circumstances cannot be rebutted, this will automatically constitute a “justified suspicion” as per Art. 9 AMLA (duty to report). The elimination of the right to report as per Art. 305ter SPC should subsequently be reflected in the AMLO-FINMA as its implementing ordinance.

Obligation to register for associations at risk of misuse: The obligation to register in the commercial register will be limited to associations that are exposed to a higher risk of being misused for terrorist financing or money laundering. This pertains to associations that are mainly involved in the collection or distribution of assets for charitable purposes abroad. Such associations will have to keep a list of members including names and addresses, and have a representative body located in Switzerland. Financial intermediaries that maintain accounts for such associations will have to obtain background information and ensure that the association has registered as required. If they fail to do so, financial intermediaries will expose themselves to a higher risk of money laundering.

Financial intermediaries and in particular the parties now captured by the AMLA (service providers, traders and associations) should not delay tackling these new rules. The following questions should be answered:

• Will I as a service provider or as an association be affected by these new rules?
  
  
• How should I, as a financial intermediary, proceed in order to exercise due diligence in regard to this expanded group of addressees (service providers, associations)?
  
  
• How will I make sure that I have an efficient and effective routine ensuring the periodic updating of client data?
  
  
• How will I have to adjust my current practices in regard to the right to report/duty to report?
  
  
• Which internal guidelines, regulations and work instructions need to be revised or, if necessary, drawn up?
  
  
• How can I efficiently draw up training requirements appropriate for the different groups of employees?