Following a consultation process[i] on partial revision of the Swiss Financial Market Supervisory Authority’s (FINMA) Anti-Money Laundering Ordinance (AMLO – FINMA), which ran for a period between March and May 2022 and in line with the recent revisions of the federal Anti-Money Laundering Act (AMLA) and its accompanying Ordinance (AMLO) in conformity with the recommendations of the Financial Action Task Force (FATF), FINMA recently announced the revision[ii] which came into force on 01 January 2023 simultaneous with the revised AMLA and AMLO[iii].
Requiring financial intermediaries to comply with stricter due diligence obligations as of January, namely a duty to verify the identity of beneficial owners, including control holders, and to update client data, the AMLA and AMLO take a risk-based approach but nevertheless seem to remain unclear as to the precise form of such identity verification obligation. Similarly, neither the AMLO – FINMA nor the agreement on the Swiss banks’ code of conduct with regards to the exercise of due diligence, namely CDB 20, seem to provide for such a specification.
As a result, it could be argued that financial intermediaries, essentially depending on the risk profile of each individual case, would initially require to carry out a plausibility test on own knowledge of their clients and – if deemed necessary – ensure that various sources of information are also exhausted. In other words, a mere verification by means of retaining identity documents of beneficial owners may not be generally sufficient for fulfilling the set obligation.
In case of natural persons with a normal risk profile, information provided by contracting parties on beneficial owners would need to be scrutinised by financial intermediaries in order to ensure consistency. In case of legal persons, however, with increased risk would come stricter scrutiny.
Under the revised AMLA, the periodic verification and updating of client data as well as documents covering all business relationships is now required, irrespective of events and risk profile of entities. The term ‘documents’, when interpreted broadly, would include every information that is collected as part of the due diligence process at the time of the creation of each and every client profile.
In the context of regulatory reporting and amendments thereof, the test of ‘reasonable suspicion’ which would otherwise result in an immediate reporting obligation to the Money Laundering Reporting Office Switzerland (MROS), has been redefined. A reasonable suspicion therefore exists in case the financial intermediary has a single or several concrete indications that the assets involved in a given business relationship:
- are connected with a criminal offence under Art. 260ter or 305bis Swiss Criminal Code;
- originate from a crime or a qualified tax offence; or
- are subject to the power of disposition of a criminal or terrorist organisation or serve the financing of terrorism, and if this suspicion cannot be dispelled on the basis of additional clarifications.
Moreover, a new right is introduced allowing financial intermediaries to terminate a reported business relationship in cases where the MROS would not notify the former within 40 working days after a report has been made that the reported information will be forwarded to a prosecution authority.
Notably, the stipulated new obligations will apply to business relationships initiated in January and onwards. For existing business relationships, on the other hand, the revised requirements would only apply in connection with the periodic review and updating of client data.
With reference back to the partial revision of the AMLO – FINMA, the amendments mainly concern further clarification on the set threshold for transactions involving cryptocurrencies. In view of risk management, FINMA has now confirmed that “technical measures are needed to prevent the threshold of CHF 1’000 from being exceeded for linked transactions within thirty days (and not just per day).” Nevertheless, this obligation would only apply to exchange transactions of cryptocurrencies for cash or “other anonymous means of payment”. The scope of application of AMLO – FINMA is also set to be expanded to include the distributed ledger technology (DLT) based trading systems and facilities.
Relevantly, FINMA has also recognised the updated regulations of the Self-Regulatory Organisation of the Swiss Insurance Association (SRO-SIA), revision of which also took place for the same underlying reasons.
[ii] See here https://www.finma.ch/en/news/2022/11/20221102-mm-gwv-finma/; https://www.finma.ch/en/~/media/finma/dokumente/dokumentencenter/anhoerungen/laufende-anhoerungen/20221102-gwv-finma/gwv_finma_de_20221027_disclaimer.pdf?sc_lang=en&hash=F7B5D65929006EED5E0611BC7958AD1C.