Switzerland Tackles Anti-Terrorism Financing Laws in Art Market
Zurich, Switzerland - Since January 1, 2016, art collectors and businesses dealing with art in Switzerland have been required to comply with new anti-money laundering and terrorist financing laws. The country’s financial sector has been under increased pressure to adapt its legal framework to international standards.
The Swiss Federal Act on Combating Money Laundering and Terrorist Financing
The Swiss Federal Act on Combating Money Laundering and Terrorist Financing in the Financial Sector (AMLA) sets out due diligence and reporting obligations for art dealers, real estate agents, luxury car dealers, and jewelers. The AMLA defines a trader as any individual or legal entity that trades professionally and receives cash payments exceeding CHF 100,000.
- Art dealers accepting more than CHF 100,000 in cash must carry out client due diligence, which includes:
- Identifying and verifying the contracting party
- Establishing the identity of beneficial owners
- Demonstrating an understanding of the economic background to and purpose of a transaction
- If a dealer knows or has reasonable grounds to suspect that assets are connected to a crime or qualified tax offence, they must report this immediately to the Swiss Money Laundering Reporting Office.
Additional Obligations
The AMLA also requires dealers to:
- Train staff
- Manage money laundering risks
- Keep accurate records
- Appoint an audit company to verify compliance
Failure to comply with these obligations is a criminal offense, punishable by up to five years’ imprisonment and/or a fine.
Freeport System Under Scrutiny
The Swiss Federal Council has also introduced new rules regarding qualified tax offences. From January 1, 2016, such offenses will be considered predicate offenses to money laundering. A “qualified tax offence” is defined as conduct that results in avoidance of tax exceeding CHF 300,000 per tax period and includes elements of “tax fraud.”
The country’s freeport system has come under scrutiny due to concerns over transparency and ownership issues. The Swiss Federal Council has acknowledged the need for increased supervision of freeports to ensure that artworks are exported on time and not stored indefinitely.
Future Developments
It remains unclear how regulation in this area will develop, but it is apparent that there is a growing momentum for change. Further guidance on the approach to be taken is expected later this year.