Financial Crime World

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Banking in Switzerland: Compliance with Anti-Money Laundering and Combating the Financing of Terrorism Regulations

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In recent years, the Swiss financial sector has implemented stringent regulations to prevent money laundering and the financing of terrorism (AML/CFT). The country’s financial institutions are required to adhere to these regulations, which include enhanced due diligence procedures for high-risk business relationships.

Enquiries on Contracting Partners and Beneficial Owners

When entering into a business relationship with a contracting partner or beneficial owner, banks in Switzerland must verify their identity. This involves:

  • Obtaining information from the contracting partner or beneficial owner
  • Conducting site visits
  • Consulting publicly accessible sources and databases
  • Gathering information from trustworthy individuals

Correspondent Banking Relationships

For cross-border banking relationships with foreign banks, additional due diligence procedures are required to ensure that the foreign bank is not prohibited from entering into business relationships with shell banks. Banks must also:

  • Clarify AML/CFT controls implemented by the foreign bank
  • Examine whether the foreign bank is subject to equivalent regulations in the anti-money laundering and counter-terrorism domain

Shell Banks

Banks are permitted to establish relationships with banks that may be considered “shell” or without substance, provided they conduct enhanced due diligence procedures.

Non-Face-to-Face Transactions and Relationships

For business relationships entered into through correspondence or via the internet, banks must:

  • Verify the identity of the contracting partner by obtaining a certified copy of an official identification document
  • Provide beneficial ownership information

For electronic means of establishing business relationships, banks must identify, mitigate, and control the risks associated with new technologies.

Suspicious Activity Reports (SARs)

Banks in Switzerland are required to report suspicious transactions to the Money Laundering Report Office (MROS). Failure to comply with this requirement can result in fines of up to CHF 500,000 or imprisonment.

Automated Suspicious Transaction Monitoring Technology

The AML Ordinance requires banks and financial institutions to operate an IT-based system for transaction monitoring. This technology must be used to identify and report suspicious transactions.

Transaction Monitoring Outside Jurisdiction

Swiss financial intermediaries are permitted to outsource transaction monitoring to persons outside Switzerland, provided that:

  • The information is still available in Switzerland
  • The results are subject to a plausibility check

However, the Swiss financial intermediary remains responsible for any transactions monitored outside of Switzerland.

Disclaimer

This article provides general guidance only and is not intended as legal advice. It is recommended that banks and financial institutions consult with a qualified attorney or regulatory expert for specific guidance on AML/CFT compliance requirements.