Financial Crime World

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Higher Risk Business Relationships: Enhanced Due Diligence Required

In Switzerland, banks and financial institutions are required to exercise enhanced due diligence when dealing with higher risk business relationships, particularly those involving Politically Exposed Persons (PEPs). The Swiss Federal Banking Commission (EBA) has issued guidelines on how to identify and mitigate these risks.

Correspondent Banking Relationships: Additional Due Diligence

For cross-border banking relationships with foreign banks, financial institutions are required to perform additional due diligence procedures, including:

  • Ensuring that the foreign bank is not prohibited from entering into business relationships with shell banks
  • Clarifying the anti-money laundering (AML) and counter-terrorism financing (CFT) controls implemented by the foreign bank

Relationships with Shell Banks

Yes, relationships with banks considered “shell” banks without substance are permitted, but financial institutions must exercise enhanced due diligence to mitigate the risks associated with these relationships.

Non-Face-to-Face Transactions: Additional Due Diligence Required

For non-face-to-face transactions and/or relationships, financial institutions must:

  • Verify the identity of the contracting party by obtaining a certified copy of an official identification document
  • Obtain confirmation of domicile and beneficial ownership
  • Establish risk-based procedures for processing repeated wire transfer instructions lacking required sender information

Suspicious Activity Reports (SARs)

SARs are made to the Money Laundering Report Office (MROS). Financial institutions are required to report any suspicious or unusual transactions, regardless of value. There are no de-minimis thresholds below which transactions do not need to be reported.

Consequences of Non-Compliance

Anyone who fails to comply with the duty to report suspicious transactions shall be liable to a fine of up to CHF 500,000, or in the case of negligence, up to CHF 150,000.

Automated Suspicious Transaction Monitoring Technology

The AML Ordinance requires financial institutions to operate an IT-based system for transaction monitoring.

Suspicious Transactions: Authority to Proceed

Financial intermediaries must:

  • Immediately freeze assets connected with a reported suspicious transaction
  • Continue to do so until they receive an order from the competent prosecution authority, but not exceeding five working days

Transaction Monitoring Outside Jurisdiction

Transaction monitoring may be outsourced to persons outside Switzerland, provided that:

  • The respective information is still available in Switzerland and subject to a plausibility check
  • The Swiss financial intermediary remains responsible

External Auditor Report on AML Systems and Controls

There is no legal requirement for an external auditor report on a bank’s AML systems and controls.

Data Protection Laws and Personal Data

Switzerland has data protection laws that regulate the processing of personal data. Financial institutions must ensure compliance with these laws when collecting, storing, and transmitting customer data.

Year of Last FATF Mutual Evaluation

The last FATF mutual evaluation was conducted in [insert year]. Switzerland is considered a member of the Financial Action Task Force (FATF).

Key Restrictions

There are no noteworthy exceptions to the law, but some caution may be warranted in areas such as:

  • Real estate
  • Notarized documents
  • Wills and trusts