On 22 May 2024 the Swiss Federal Council[i] decided on submitting further reforms in the realm of the anti-money laundering (AML) framework to the Parliament, with an aim to reinforce the competitiveness of the country both as a financial centre and a commercial hub.

These reforms, which are expected to come into force by early 2026, include the introduction of a non-public federal (transparency) register of beneficial owners. A simplified registration will be provided for not only associations and foundations but also sole proprietorships and limited liability companies. The register will be managed by the Federal Department of Justice and Police (FDJP).

Other proposals refer to the AML due diligence obligations applicable to certain advisory activities, in particular legal advice. While maintaining professional secrecy, these obligations will kick-in in certain activities with a potentially increased money laundering risk, such as the founding and structuring of companies as well as real estate transactions.

Precisely speaking, the following will be pivotal:

. The client’s identity must be verified and the beneficial owner and the object and purpose of the transaction or service must be identified;
. If the client, or the transaction or service, has a particularly high risk profile, it may be necessary to clarify the origin of the funds or to request additional explanations about the purpose of the requested transaction or service;
. The measures undertaken in connection with due diligence must be appropriately recorded.

In this respect, the responsibility for supervising the exercise of due diligence obligations by the affected lawyers and legal advisors will be vested upon the self-regulatory organisations (SROs).

Furthermore, additional organisational measures will be set in place against i) circumvention of sanctions under the Embargo Act, ii) cash payments exceeding CHF 15,000 in precious metals trading and iii) any amount in real estate business.

On a different note, on 22 May 2024 the Federal Council[ii] launched a consultation, set to run until mid September 2024, on the Cybersecurity Ordinance which essentially outlines the implementation of the obligation to report cyberattacks on critical infrastructures and the national cybersecurity strategy as well as the duties of the Swiss National Cyber Security Centre (NCSC).

The Ordinance also specifies exempted entities from the reporting obligation, namely those suffering a cyberattack which have no direct impact on the functioning of the economy or the well-being of the population. In addition, a general exemption would apply to companies with fewer than 50 employees, an annual turnover or annual balance sheet total of less than CHF 10 million and authorities that are responsible for fewer than 1,000 inhabitants.

Lastly, on 15 May 2024 the Federal Council[iii] decided to initiate a consultation, applicable until early September 2024, on extending the international automatic exchange of information in tax matters (AEOI). Set to apply from 1 January 2026, the extension would concern the new AEOI regarding cryptoassets and the amendment of the standards for the automatic exchange of financial account information.

Notably, the OECD update to the common reporting and due diligence standards for financial account information (CRS) and the new cryptoasset reporting framework (CARF) was published in October 2022. While the amendments to the CRS clarify interpretation issues and take practical experience into account, the CARF regulates the handling of cryptoassets and their providers.

Subject to parliamentary approval, Switzerland thus intends to also implement the CARF with an intention to effectively address existing gaps in the tax transparency mechanism and to ensure equal treatment with respect to traditional assets and financial institutions.

[i] See here https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-101100.html.

[ii] See here https://www.ncsc.admin.ch/ncsc/en/home/dokumentation/medienmitteilungen/newslist.msg-id-101088.html.

[iii] See here https://www.admin.ch/gov/en/start/documentation/media-releases/media-releases-federal-council.msg-id-101030.html.

Alongside the 2023 revision of Swiss company law where foundations were also inevitably affected, precisely from the perspectives of insolvency and disclosure requirements, as of 2024[1] the foundation law has become more simplified in a quest to provide for more flexibility.

The applicable changes, namely in the context of Articles 84 – 86 of the Swiss Civil Code (CC), could be summarised as follows:

On the other hand, the Swiss Federal Act on Private International Law (PILA) has recently[2] undergone a partial revision from the cross-border succession law perspective with the adoption of amendments on chapter 6 of the Act by the Swiss Parliament in December 2023.

While the date of entry into force of the amendments is yet to be precisely defined, a referendum deadline has been set until 18 April 2024.

The purpose behind the revision is to primarily improve the Act’s alignment with the EU Succession Regulation of 2012, applicable in all the EU Member States as of 2015 – save for Denmark and Ireland.  

With deceased’s last place of residence still serving as the primary connecting criterion, the changes aim at cutting down conflicts of jurisdiction in cases with a cross-border angle, and increasing party autonomy as per choice of applicable law to estate planning.

The changes include:

From a practical perspective, however, the exclusion of Swiss jurisdiction as well as the choice of a national jurisdiction and applicable law must be explicitly stipulated in the testamentary disposition of a testator or testatrix.

[1] See here https://www.fedlex.admin.ch/eli/oc/2022/452/de.

[2] See here https://www.parlament.ch/centers/eparl/curia/2020/20200034/Schlussabstimmungstext%201%20NS%20D.pdf.

The EU Data Act[1] aiming to regulate fair access to and use of data has entered into force in January 2024 following its publication in the Official Journal of the European Union. The Act is set to become applicable across the bloc as of September 2025.

Setting out rules for the use, access, availability and sharing of generated personal and non-personal data, the Act targets manufacturers of connected products and providers of related services irrespective of their place of establishment – all grouped under the umbrella term of ‘data holders’ either in the form of a natural or legal person.

In this context, ‘connected product’ is defined as “an item that obtains, generates or collects data concerning its use or environment and that is able to communicate product data via an electronic communications service, physical connection or on-device access, and whose primary function is not the storing, processing or transmission of data on behalf of any party other than the user”. In addition, the term ‘related services’ refers to “a digital service, other than an electronic communications service, including software, which is connected with the product at the time of the purchase, rent or lease in such a way that its absence would prevent the connected product from performing one or more of its functions, or which is subsequently connected to the product by the manufacturer or a third party to add to, update or adapt the functions of the connected product”.

Distinguished from the term ‘user’, ‘data recipient’ means “a natural or legal person, acting for purposes which are related to that person’s trade, business, craft or profession, other than the user of a connected product or related service, to whom the data holder makes data available, including a third party following a request by the user to the data holder.”

The following elements set out in the Act carry significance:

The Data Act shall be read without prejudice to the EU GDPR, whereby those data access rights granted under the former shall be treated separately from the access rights granted to individuals under the latter.

Lastly, the Act’s inherent extraterritoriality shall carry direct consequences for manufacturers and providers outside the bloc, including Swiss based entities. In other words, any commercial activity falling under the scope of the Act with products and services being offered to the EU market, respectively any engagement in data sharing with stakeholders within the EU would need to undergo necessary due diligence within the set timeframe in order to ensure timely compliance.

[1] See here https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX:32023R2854&qid=1707924358044.

After over a year from the European Commission’s proposal[i] for a new Cyber Resilience Act for protection of consumers and businesses from (digital) products, which contain inadequate security features, through the introduction of mandatory requirements, a political agreement[ii] has now been reached effective as of 1 December 2023 between the other two legs of the Trilogue, namely the European Parliament and the Council.

The rather comprehensive proposal is set to cover both hardware and software products which may entail varying levels of risk and therefore requiring different security measures. As a result, the type of conformity assessment per product is set to be adapted to respective risk level.

Consequentially, manufacturers of hardware and software, developers and distributors aiming to import and offer their products on the EU market, will essentially have to implement cybersecurity measures across the entire lifecycle of their products, from design and development stages to after placement on the market. Specifically, not only those that are sold to end users and consumers, but also those used in companies for production, sourced as precursors and further processed, or those forming part of supply chains.

Notably, those products that are already covered by other existing EU legislation, such as the scope of the NIS2 Directive, will be excluded.

In this context, compliance with the proposed legislation will essentially be rendered in the form of a CE marking which is an indication confirming that the products sold on the market of the European Economic Area (EEA) have been duly assessed to meet safety, health and environmental protection requirements.

Furthermore, manufacturers will be obliged to provide consumers with a precise length by which a given product would be expected to be utilised.

Applicable to all products that are connected directly or indirectly to another device or network, the proposed legislation will now have to be formally approved and expected to enter into force following its publication on the Official Journal.

Given that the EU serves as the most important sales market for many of the industries and sectors in Switzerland, the direct impact of the proposed legislation on Swiss actors and stakeholders is undeniable. Importantly, the Swiss exporters of those products that could be classified as “critical” within the meaning of the proposed text will have to firstly prove that the related digital components do meet the set security standards and to secondly submit conformity assessments as deemed necessary.

[i] See here https://ec.europa.eu/commission/presscorner/detail/en/IP_22_5374.

[ii] See here https://ec.europa.eu/commission/presscorner/detail/en/ip_23_6168.

The Swiss Federal Council has recently announced[1] the launch of a consultation process effective until 29 November 2023 in order to tighten the existing anti-money laundering rules.

The proposed framework particularly focuses on the identification of legal entities, whereby a mandatory federal (transparency) register is set to be introduced containing information on beneficial owners. The non-public register will be coordinated by the Federal Department of Justice and Police (FDJP) and accessible by competent authorities including financial intermediaries. Notwithstanding, a rather simplified procedure will also be put in place for certain legal forms such as sole proprietorships, foundations, associations as well as limited liability companies.

Furthermore, the monetary threshold for due diligence obligations in the context of trade in precious metals and stones will be significantly lowered from CHF 100,000 to CHF 15,000.

An all inclusive obligation for due diligence will also be introduced for cash payments in real estate business irrespective of the monetary amount involved.

By the end of the consultation period the proposal is expected to be presented at the parliament in early 2024.

[1] See here https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-97561.html.

In a recent decision of the Court of Justice of European Union (CJEU)[1], namely Breyer v REA, the ongoing question of how and when to strike a balance between commercial interests vs public interest, in particular rights to privacy, equality and expression, was once again brought forward.

The case concerns an EU funded research project, namely iBorderCtrl, on development of an AI enabled emotion recognition technology which would be deployed at borders as part of the EU border control management scheme. The issue arose upon refusal of the EU institutions to disclose information and give full access to documentation relating both to the authorisation of the project and to its progress. The main reasoning given was the protection of commercial interests of stakeholders.

As a result, an action was brought against the European Research Executive Agency (REA) by a member of the European Parliament (EP) mainly on the grounds that an overriding public interest clearly existed which would justify the need for full disclosure of documentation in particular in the context of a technology which could in principle be utilised for mass surveillance and crowd control purposes.

The verdict of the CJEU however falls short of effectively outweighing public interest over commercial interests by essentially stipulating that “general considerations” of overriding public interest may not be sufficient to establish a “particularly pressing” need for transparency.

Such a stance could certainly undermine the importance of democratic oversight and public debate and the need for transparency in software development in projects with undeniable impact on individuals at large.

Furthermore, it was confirmed that tools and technologies developed within the framework of a given project are considered trade secrets, only setting aside the results of the project.

[1] See here for details https://curia.europa.eu/juris/document/document.jsf?mode=DOC&pageIndex=0&docid=277067&part=1&doclang=EN&text=&dir=&occ=first&cid=1901751.

With more than 750 member firms and 36,000 lawyers across 200+ countries, Nextlaw Referral Network[1] is considered the largest legal referral network in the world. Created by Dentons the network employs a detailed screening system to guarantee the quality of its member firms and has developed proprietary technology to allow members to identify lawyers, legal counsels and advisers at other member firms with jurisdiction-specific appropriate experience where clients need personalised consultancy.

[1] See here for more information: https://www.nextlawnetwork.com/.

The European Parliament (EP) has recently[i] voted to adopt its negotiating position in a plenary session on the Artificial Intelligence (AI) Act.

Essentially following a risk based approach, the discussions over rules span around ensuring that the developments and use of AI applications and systems in Europe would in theory comply with EU rights and values including “human oversight, safety, privacy, transparency, non-discrimination and social and environmental well-being”.

In a nutshell, next to a revised definition of an AI system in line with the OECD version, the proposed to-do list, targeting providers and deployers among other actors, contains the following:

Notably, the ban on “post” remote biometrics identification would be subject to the exception of law enforcement upon prior judicial authorisation in the context of serious crimes.

Furthermore, those generative AI systems based on foundation models, such as ChatGPT, would have to comply with transparency requirements and put in place effective safeguarding mechanisms against illegal content. In the case of use of copyrighted data for training models, detailed summaries would need to be made publicly available. Registration in the EU database will also be obligatory for foundation models.

Importantly, alongside defining responsibilities across AI value chain of various actors involved, the EP proposes the development of non-binding standard contractual clauses to regulate rights and obligations in line with each actor’s level of control in a given value chain.  

Taking into account that the AI Act is set to be also applicable to providers and users of AI systems located outside of the EU – provided that the output produced is intended to be used in the EU, these developments are pivotal for the Swiss market.

[i] See here https://www.europarl.europa.eu/pdfs/news/expert/2023/6/press_release/20230609IPR96212/20230609IPR96212_en.pdf; https://www.europarl.europa.eu/doceo/document/TA-9-2023-0236_EN.html.

Following the binding decision of the European Data Protection Board (EDPB) in April 2023[i], the Irish Data Protection Commission (DPC) has announced on 22 May[ii] a fine of EUR 1.2 bn against Meta Platforms Ireland Limited on the grounds of the company’s unlawful transfer of personal data from the EU/EEA to the USA, effectively from July 2020 to date, within the context of provision of its Facebook related services. A 6-month deadline is imposed for suspension of any future transfers, and for either deletion or moving of the already transferred data back to the EU.

The subject matter transfers have been carried out on a systematic, repetitive and continuous manner on the basis of standard contractual clauses (SCC).

The infringement essentially relates to Article 46(1) of the GDPR, whereby “…a controller or processor may transfer personal data to a third country or an international organisation only if the controller or processor has provided appropriate safeguards, and on condition that enforceable data subject rights and effective legal remedies for data subjects are available.”

Following the European Commission’s draft adequacy decision in December 2022, the political agenda is already put in place for a new EU – US data privacy framework which is set to enter into force by the end of 2023. In this context, the question remains as to the actual effectiveness of the DPC decision in favour of data privacy given that the set 6-month deadline could in principle be seen as a leeway for the company to delay compliance until the new framework becomes operative.

[i] See here https://edpb.europa.eu/our-work-tools/our-documents/binding-decision-board-art-65/binding-decision-12023-dispute-submitted_en.

[ii] See here https://www.dataprotection.ie/en/news-media/press-releases/Data-Protection-Commission-announces-conclusion-of-inquiry-into-Meta-Irelan

The German Financial Supervisory Authority (BaFin) has on 8 March 2023[i] announced its general stance with respect to the classification of non-fungible token models (NFTs).

Suggesting a strictly case-by-case analysis, BaFin takes a rather conservative approach towards defining NFTs as securities primarily due to lack of immediate exchangeability. In other words, an NFT could potentially be considered a security only in cases where, for instance, a significant number of these tokens would embody identical repayment and interest claims.

Also, if an NFT embodies types of ownership rights such as a promise of distribution, the token could in principle be considered as an investment under the Asset Investments Act (VermAnIG). The mere act of speculation by token holders would, on other hand, not essentially suffice for the NFT in question to assume an investment purpose.

Notably, NFTs can in principle have a potential use in the financial sector, especially in cases where they can be transferable and tradable on the financial market, hence embedding certain security like rights i.e. membership rights or contractual claims similar to stocks and debt instruments. As stipulated by BaFin, “the transferability can be assumed as a given with the current standards […] whereas tradability requires a minimum of standardisation.”

To recap, here the nexus would be the definition of types of rights associated with a given token model alongside the potential utility of those rights after the token issuance.

Taking a stance similar to the draft EU proposal for a Regulation in Markets for Crypto Assets (MiCA), BaFin adopts the position that NFT fragmentation, which would result in fungible tokens each representing an equal share of an NFT, would in theory satisfy the interchangeability feature.

On a different note, France, with the parliamentary voting of 28 February 2023[ii], is set to introduce tighter licensing rules for new entrants to its crypto ecosystem in an attempt to harmonise its national laws in accordance with the upcoming EU laws. Under the existing rules, entities have the option to opt for simplified registration procedures with the l’Autorité des Marchés Financiers (AMF) under less disclosure requirements. Once passed, the new players will be facing stricter anti money laundering (AML) measures, namely clear segregation of customer funds, a new set of reporting guidelines and more detailed risk and conflict of interest related disclosures.

Lastly, the sudden failures and recent regulatory issues in the US financial sector surrounding the three active financial institutions in the cryptocurrency industry, namely Silicon Valley Bank (SVB), Signature Bank and Silvergate Capital, have raised confidence questions and have inevitably spawned ever more volatility in the industry. A simple bank run, where large numbers of depositors withdraw funds simultaneously in fear of potential insolvency, is so far seen as the root cause.

In the context of potential contagion risk, however, questions have also arisen as to whether the banking system in Europe has in general more effective risk management infrastructure and stronger liquidity requirements in place.

[i] See here https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Fachartikel/2023/fa_bj_2303_NFT.html.

[ii] See here https://www2.assemblee-nationale.fr/scrutins/detail/(legislature)/16/(num)/1098.