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Financial Fraud Prevention Strategies in Switzerland Take Center Stage as FINMA Steps Up Supervision

Switzerland’s Financial Market Supervisory Authority (FINMA) has intensified its focus on institutions’ reporting systems and risk management practices to combat money laundering and prevent financial fraud. The agency’s goal is to achieve a sustained impact on the financial sector’s ability to prevent criminal activity.

The Importance of Effective Anti-Money Laundering Measures

Switzerland’s export-oriented and internationally networked financial center relies heavily on effective anti-money laundering measures to maintain its reputation and credibility. The Anti-Money Laundering Act (AMLA) reporting system plays a crucial role in this regard, as it enables financial institutions to report suspect funds to the Money Laundering Reporting Office Switzerland (MROS). This, in turn, helps law enforcement agencies combat criminal activity.

FINMA’s Supervisory Activities

In 2017, FINMA conducted on-site supervisory reviews of 23 institutions and filed criminal charges in seven instances based on contraventions of the reporting obligation. The agency also imposed its own enforcement measures in several cases.

Good Practices

• Some institutions demonstrated robust reporting conduct, such as conducting thorough investigations into suspicious transactions and submitting timely reports to MROS.
• For example, one financial intermediary investigated a client suspected of involvement in a serious criminal offense, documenting its findings and concluding that the assets were not linked to the alleged crime.

Poor Practices

• FINMA also encountered instances of poor reporting conduct, including:
  • Failures to regularly check client databases against external compliance providers
  • Delays in reporting suspicious transactions
• For example, an international wealth management bank failed to report unusual transactions connected to a criminal offense committed abroad, instead commissioning a law firm to provide a legal opinion on the matter.

The Connection between Risk Management and Financial Intermediaries

Only by using carefully selected criteria to assess high-risk business relationships can institutions identify suspicious activity and report it to MROS. FINMA’s supervisory experiences highlight the importance of establishing robust risk assessment criteria, including:

• Identifying high-risk countries
• Professions
• Fields of business

The agency also emphasized the need for transaction monitoring to detect deviations from normal activities and take into account the institution’s business activity.

Conclusion

FINMA’s efforts to prevent financial fraud in Switzerland are critical to maintaining the country’s reputation as a financial hub. By stepping up supervision and enforcement, the agency aims to promote a culture of compliance among financial institutions and protect the integrity of the financial system.