Financial Crime World

Swiss Financial Institutions and Virtual Asset Service Providers Navigate Strict KYC Regulations in Switzerland

Switzerland, known for its picturesque Alpine landscape and global financial hub, has significant responsibilities as a result of its reputation. Financial institutions and Virtual Asset Service Providers (VASPs) operating in the country must adhere to stringent Know Your Customer (KYC) regulations to prevent money laundering and other unlawful activities.

Switzerland: Global Financial Hub with Strict Regulations

Switzerland, surrounded by France, Germany, Italy, and Austria, is a major player in the global finance arena. Its status as a world-class financial center, home to some of the world’s largest banks known for pioneering innovative banking products and services, is built on a foundation of privacy. However, this privacy comes with a price: strict adherence to KYC and Anti-Money Laundering (AML) regulations.

Swiss Regulators and Financial Institutions

Switzerland’s government takes an active role in combating money laundering activities. Financial institutions within the country are required to carry out extensive customer due diligence when onboarding new clients or processing large transactions from existing clients.

  • FINMA: FINMA (Financial Market Supervisory Authority) oversees compliance with KYC and AML regulations for financial institutions and VASPs.
  • Swiss Federal Banking Commission: This body issues licenses to financial institutions and monitors adherence to KYC and AML regulations.
  • Swiss National Bank: Guidance on meeting legal obligations related to KYC and AML regulations is provided by the Swiss National Bank.

KYC Regulations for Financial Institutions (FIs) and VASPs

Swiss regulators enforce strict KYC and AML rules for FIs and VASPs to ensure they only deal with legitimate customers, transactions, and activities.

Identification and Due Diligence

identification procedures, record keeping, suspicious activity reporting obligations, and implementing adequate AML/CFT policies and procedures.

FIs

FIs must adhere to FINMA’s KYC rules, which include:

  1. Customer identification: Financial institutions and VASPs must identify their customers through appropriate due diligence measures.
  2. Record keeping: Dealings and transactions must be documented and kept for at least 10 years.
  3. Reporting: Any suspicion of money laundering or terrorist financing activities must be reported.
  4. Beneficial ownership information: Swiss banking institutions are subject to the Swiss Money Laundering Act (MLA), which mandates them to establish beneficial ownership information regarding corporate entities they do business with.
  5. Self-Regulating Organization (SRO): Be part of an SRO to ensure affiliate companies and financial intermediaries are compliant with FINMA regulations.

KYC Checks for Individuals

  1. Identity document verification: Passport, national ID card, or other official documents.
  2. Address confirmation: Proof of residence such as a utility bill or bank statement.

KYC Checks for Corporate Entities

  1. Commercial register number: Provided by the Swiss Commercial Register.
  2. Ultimate Beneficial Owner (UBO) information: The individual(s) who hold(s) significant control over the company and owns at least 25% of the shares or voting rights, or who has the right to exercise significant influence over the company.
  3. Registered office in Switzerland.

Additional KYC Requirements for VASPs

VASPs must comply with additional KYC requirements:

  1. Primary source document verification: AML checks must include primary source document verification before onboarding new customers.
  2. Ongoing monitoring: Customer due diligence checks should be conducted regularly to ensure accuracy of risk profiles and detect suspicious activities.
  3. Risk assessments and profiles: Implement effective customer due diligence processes to build accurate risk profiles and process high-risk customers and transactions through additional checks.

Partner with KYC-Chain for Streamlined Compliance

KYC-Chain offers an end-to-end onboarding workflow solution enabling businesses regulated by FINMA or seeking to do business in Switzerland to efficiently and securely carry out necessary KYC checks, complying with Swiss AML and KYC laws as well as most global jurisdictions’ regulations. Contact KYC-Chain to learn more about our KYC onboarding solution.