Financial Crime World

Switzerland Tightens Grip on Money Laundering as Financial Crimes Act Kicks In

Switzerland has taken a significant step in combating financial crimes by strengthening its regulatory framework against money laundering. The country’s Financial Market Supervisory Authority (FINMA) has implemented a robust system to monitor and prevent money laundering in the financial sector.

Anti-Money Laundering Act (AMLA)

The AMLA requires financial intermediaries such as banks, securities firms, insurers, and institutions under the Collective Investment Schemes Act to comply with due diligence and disclosure requirements. FINMA has issued a detailed ordinance outlining the requirements for these intermediaries.

Compliance Requirements

Financial service providers must:

  • Verify the identity of clients
  • Identify beneficial owners of assets
  • Clarify financial backgrounds and purposes of business relationships or transactions that appear unusual
  • Implement organizational measures to prevent money laundering and financing of terrorism, including:
    • Issuing internal directives
    • Training staff
    • Performing inspections

Monitoring Compliance

FINMA has appointed recognized audit firms to assist in monitoring compliance with these requirements among supervised institutions. The authority may also conduct on-site inspections and take measures to correct breaches of the law or impose sanctions where necessary.

Industry-Specific Regulations

Industry-specific regulations have been enacted for:

  • Banks: The Swiss Bankers Association has implemented a code of conduct requiring banks to verify client identities and identify beneficial owners.
  • Securities firms: FINMA requires securities firms to comply with AMLA requirements, including verifying client identities and performing due diligence.
  • Insurers: Insurance companies may choose to be supervised by FINMA or affiliate with the self-regulatory organization (SRO) of the Swiss Insurance Association. The SRO supervises its members’ compliance with money laundering requirements on behalf of FINMA, while non-members are supervised directly by the authority.
  • Institutions under the Collective Investment Schemes Act: These institutions must comply with AMLA requirements and implement organizational measures to prevent money laundering.

Independent Portfolio Managers and Trustees

Independent portfolio managers and trustees are also subject to anti-money laundering regulations. FINMA authorizes these entities, and supervisory organizations monitor their compliance with anti-money laundering measures.

Definition of Money Laundering

The Swiss government has defined money laundering as channeling funds from illegal activity into the legal economy. The process involves three phases:

  • Placement: Introducing illegally obtained funds into the financial system
  • Layering: Concealing the source of funds through complex transactions and layers of intermediaries
  • Integration: Integrating laundered funds into the legitimate economy

Financial intermediaries must comply with stringent due diligence and reporting requirements to prevent money laundering.

Conclusion

By strengthening its regulatory framework, Switzerland aims to enhance the credibility and proper functioning of the financial system while preventing financial crimes. The country’s efforts demonstrate a commitment to combating money laundering and ensuring the integrity of its financial sector.