Switzerland’s Financial Market Authority (FINMA) Steps Up KYC Compliance Efforts
Introduction
In its ongoing efforts to combat money laundering, FINMA has set a goal of achieving sustained impact on financial institutions in Switzerland. In 2017, the authority focused on reporting systems and risk management practices within these institutions.
Importance of Consistent Anti-Money Laundering Measures
According to FINMA, consistent compliance with anti-money laundering measures is crucial for Switzerland’s export-oriented and internationally networked financial center. The country’s Anti-Money Laundering Act (AMLA) requires financial institutions to report suspicious transactions to the Money Laundering Reporting Office Switzerland (MROS). FINMA has increased its supervisory activities and filed criminal charges in several cases involving non-compliance with reporting requirements.
Positive Examples of KYC Compliance
FINMA identified both positive and negative examples of KYC compliance during its supervisory activities. Some financial institutions conducted thorough investigations of clients, examining money flows and time sequences, and documenting findings. In some instances, institutions even went beyond their reporting obligations by informing FINMA of suspicious transactions.
Negative Examples of KYC Compliance
On the other hand, FINMA encountered cases where institutions failed to regularly check client databases against external compliance providers, delayed reporting suspicious transactions, or did not document their investigations. One notable example involved a financial institution that accepted large deposits from a politically exposed person (PEP) without conducting adequate due diligence.
Importance of Risk Management in Preventing Money Laundering
FINMA emphasized the importance of risk management in preventing money laundering. The authority stated that financial institutions must use carefully selected criteria to assess high-risk business relationships and transactions, identify suspicious activity, and report it to MROS.
Practices Regarding High-Risk Business Relationships
During its supervisory activities, FINMA observed various practices regarding high-risk business relationships. Some institutions had detailed risk assessments, while others failed to define high-risk countries or professions. The authority also noted that some financial institutions struggled to manage large numbers of high-risk clients with their current compliance resources.
Importance of Transaction Monitoring
FINMA highlighted the importance of transaction monitoring in identifying high-risk transactions. The authority emphasized the need for financial institutions to consider various risk factors, including corruption risks and drug dealing, when monitoring transactions.
Conclusion
Overall, FINMA’s efforts aim to strengthen KYC compliance in Switzerland’s financial sector and prevent money laundering. By promoting good practices and addressing poor ones, the authority seeks to ensure a robust and effective anti-money laundering framework.
Key Takeaways
- FINMA is stepping up its supervisory activities to combat money laundering
- Consistent compliance with anti-money laundering measures is crucial for Switzerland’s financial center
- Financial institutions must use carefully selected criteria to assess high-risk business relationships and transactions
- Transaction monitoring is essential in identifying high-risk transactions
- FINMA aims to promote good practices and address poor ones to ensure a robust anti-money laundering framework.