Financial Crime World

Switzerland Takes Aim at Financial Crime Prevention

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The Swiss Financial Market Supervisory Authority (FINMA) has set its sights on tackling financial crime in Switzerland, with a focus on institutions’ efforts to prevent money laundering.

Preventing Financial Crime is Crucial for Switzerland’s Financial Center

Switzerland’s export-oriented and internationally networked financial center makes it crucial to prevent criminal financial activity. The country’s Anti-Money Laundering Act (AMLA) requires market participants to report suspicious funds to the Money Laundering Reporting Office Switzerland (MROS). FINMA has stepped up its supervision and investigations of reporting under AMLA, conducting 23 on-site supervisory reviews in 2017.

FINMA’s Efforts to Combat Financial Crime

  • Conducted 23 on-site supervisory reviews in 2017
  • Filed criminal charges in seven instances based on contravention of the reporting obligation in Article 9 in conjunction with Article 37 AMLA
  • Imposed its own enforcement measures in several cases

Good and Bad Practices Observed by FINMA

During the reporting year, FINMA encountered both good and bad practices in its supervisory and enforcement activities.

Good Reporting Conduct

  • Examples of exemplary reporting conduct included a financial intermediary that conducted an in-depth investigation into a client following media reports of a suspected criminal offense.
  • The intermediary checked information according to the know-your-customer (KYC) principle, examined money flows and time sequences, and documented its findings. It concluded that the assets were not linked to the reported matter and therefore not tainted.

Poor Reporting Conduct

  • FINMA observed poor reporting conduct in several instances, including:
    • An international wealth management bank failed to regularly check its client base against a database maintained by an external compliance provider.
    • The bank was unaware of new information coming to light about its client, which should have led to the filing of a report.

Shortcomings in Risk Management Practices

FINMA also noted shortcomings in institutions’ risk management practices. The authority criticized Switzerland’s reporting system, citing the need for more thorough examination of compliance with reporting requirements when suspect transactions are involved. Regulatory auditors should also examine compliance with reporting requirements more thoroughly, according to FINMA.

Key Takeaways

  • Connection between risk management and financial intermediaries is critical
  • Institutions must use carefully selected criteria to assess high-risk business relationships and transactions
  • High-risk countries based on where clients generated their assets were not sufficient

Transaction Monitoring

FINMA encountered numerous positive and negative examples of transaction monitoring in the past year. Some institutions used scenario-based approaches, combining risk criteria and considering risks posed by business relationships and transactions.

Examples

  • Institutions that adequately monitored transactions, such as a bank that used scenario-based approaches
  • Institutions that failed to monitor transactions, such as a bank that shifted large sums of money back and forth between accounts belonging to the same beneficial owner, without pursuing further investigation

Conclusion

FINMA’s efforts to combat financial crime in Switzerland are critical to maintaining the country’s reputation as a hub for international finance. The authority’s actions will likely have far-reaching implications for institutions operating in the Swiss market.