Revised AMLA Revised Anti-Money Laundering Act

The Swiss Federal Council published the draft law and the related message concerning the planned revision of the Anti-Money Laundering Act (AMLA) on 26 June 2019 after the consultation period ended. In comparison to the FDF’s consultation draft (also read our previous article), only a few but significant changes were made.

• Unchanged to the consultation draft, so-called service providers are now also subject to the AMLA. In addition, though, they will not only be subject to the duties in respect of diligence and review but also the duty to report to the MROS.
• Also in line with the consultation draft, the threshold above which precious metals and gemstone traders must undertake duties in respect of due diligence in case of cash payments was lowered to CHF 15,000 (previously CHF 100,000). In view of the already existing Article 8a(3) AMLA, one should note that this threshold also applies in case the transaction is divided into various tranches.
• Moreover, the lawmakers also decided to retain financial intermediaries’ obligation to verify the information on the beneficial owner. Financial intermediaries must apply the diligence necessary according to the circumstances to find out the beneficial owner’s identity.
• The law has also retained the duty to periodically review client profiles to see if these are up-to-date, just as originally required by the consultation draft. Obsolete data must be updated. The frequency of the review depends on the clients’ risk classification.
• In comparison to the consultation draft, there are various adjustments planned that relate to the system in place to report suspicions. While the duty to report and the right to report remain unchanged, the term “justified suspicion” is still to be fleshed out at ordinance level in the AMLO. Under the new law, the MROS’s 20-day-long processing period has been replaced with a 40-day-long period. After this period, the financial intermediary may terminate the business relationship (always retaining the paper trail), unless the MROS has informed it that it will forward the case to the prosecuting authorities.
• As already alluded to in the consultation draft, the law has also retained the change related to the law on associations (Swiss Civil Code (CC)). Associations that could be misused to finance terrorism or launder money will now have to be entered in the commercial register. Associations subject to entry in the commercial registry must maintain a members list and be represented by a person domiciled in Switzerland.
• The purchase of precious metals scrap will also be under closer scrutiny, just as called for in the consultation draft. Persons dealing in precious metals scrap commercially will now have to adhere to the duties in respect of diligence and documentation and will be subject to registration and licensing.
• In addition to what the consultation draft had foreseen, the message states that the Central Office for Precious Metal Control will now also act as supervisory authority for auditors of precious metals traders in regard to AMLA matters. The Precious Metals Control Act will be adjusted accordingly.
• As already stated in the consultation draft, the new law will contain a further exception to the prohibition of providing information in accordance with Article 10a AMLA. Under certain circumstances, financial intermediaries domiciled in Switzerland may now also inform their parent company abroad of reports filed with the MROS.

Extended circle of addressees subject to the Anti Money Laundering Act: For persons now also subject to the AMLA (especially service providers), complying with the AMLA requirements will most likely be a book with seven seals. The efforts needed to implement the new requirements as well as the contractual amendments should not be taken lightly.

Verifying the information on the beneficial owner: In practice, many financial intermediaries already now collect background information on their clients, including the beneficial owners, and perform investigations that go beyond the mere determination of the beneficial owner. However, what has changed, is that the amended AMLA provisions now explicitly enshrine this concept, which is why it may be necessary to determine whether currently used procedures actually meet the new requirements. Concerning the level of diligence required, the legal text refers to the circumstances. In practice, however, it remains to be seen from which point on the financial intermediary may assume that enough has been done to ensure this information and how real-life difficulties, such as the lack of independent sources to verify information, will be handled.

Constant updating of client data: The anti-money regulations already now implicitly state that business relationships have to be reviewed periodically. However, up to now, such a review consisted mostly of checking doubtful information. Going forward, the duty will also extend to reviewing the veracity of all client information. In regard to the frequency, the scope and the type of review, the draft law refers to the risk that the contractual party poses. As a result, financial intermediaries will have to review their existing control mechanisms and think how they can smoothly integrate the new requirements into these. Financial intermediaries should also analyze to what degree client data has to be updated already during transactions monitoring.

Retention of the right to report: Most of the opinions on the consultation draft were against eliminating the right to report. As a result, both the duty as well as the right to report were retained. In order to fulfill the FATF recommendation on the legal clarification of the relationship between the two concepts, the AMLO will have to define the term “justified suspicion” in more detail. The expected wording should mainly reflect established jurisprudence, according to which a suspicion exists if investigations pursuant to Article 6(2) AMLA cannot dispel these. From a material point of view, there will thus be no significant changes for financial intermediaries. Nonetheless, the relevant deadlines (see above) will have to be integrated into the processes.

Based on the currently available information, the new law will not enter into force before 2021. For financial intermediaries and other actors who may now also become subject to the revised law (e.g. service providers), it may make sense to begin a timely analysis of business activities and possible implications in regard to AMLA in order to meet the deadlines for implementing the new law. Especially the following questions could be of relevance:

• Will I, as service provider or association with specific activities, become subject to the revised AMLA? What will the implications be?
• As a financial intermediary already subject to AMLA, how will the amendments affect me? How will it affect the corporate group’s structure?
• How will I ensure that the periodic update of client data will take place?
• What kind of changes will take place in relation to the reporting procedure to MROS?
• In what way will our policies and other internal documents, processes and controls have to be updated?
• How can we train our employees quickly and in consideration of their sphere of action?
• How will the new provisions affect risk appetite, risk management as well as reporting?
• How can I efficiently coordinate any amendments with amendments in other regulations and codes of conduct (e.g. AMLO-FINMA, CDB 20)?