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Switzerland Embarks on Enhanced Anti-Money Laundering Measures

In a bid to strengthen its anti-money laundering (AML) and counter-terrorism financing (CFT) regulations, Switzerland is set to introduce a range of reforms aimed at improving the country’s compliance with international standards. The changes come as part of the country’s 5th round of mutual evaluation by the Financial Action Task Force (FATF), which will see regular monitoring of progress made in implementing AML/CFT measures.

Guidance on Due Diligence and Obligated Entities

One key area of focus is the provision of clearer guidance on due diligence for financial institutions. This may involve broadening the scope of obligated entities, similar to the EU’s 6th anti-money laundering directive. Senior management at Switzerland’s financial institutions will need to ensure that their organizations are prepared to adapt to these changes and implement robust due diligence procedures.

Terrorist Financing Ban

In a related development, the Swiss government has proposed banning Hamas and related organizations in February 2024. The aim of this move is to prevent terrorism financing and ensure Switzerland does not become a haven for terrorist activities. This ban may lead to enhanced CFT controls on clients and third parties, which financial institutions will need to implement.

Increased Enforcement Action

The Swiss Financial Market Supervisory Authority (FINMA) has already taken significant enforcement action in 2023, freezing CHF 7.7 billion of assets held by Swiss banks suspected of Russian money laundering. This trend is likely to continue in 2024, with a focus on sanctions circumvention and evasion.

Pictet Fine

The recent $123 million fine imposed on Pictet by the US Department of Justice serves as a reminder of the importance of effective due diligence and compliance. The fine was issued for conspiring to facilitate tax evasion, highlighting the risks associated with limitations in due diligence.

Transparency Register on Beneficial Owners

Another significant development is the proposed Federal Act on Transparency of Legal Entities (TLEA), which will introduce a transparency register on beneficial owners of legal entities. This register will require over 500,000 legal entities to disclose information on their beneficial owners, including shareholders and third-party stakeholders.

Implementation Challenges

As financial institutions in Switzerland adapt to these changes, they must also ensure that their AML/CFT programs are robust enough to meet the new requirements. Moody’s, a leading provider of beneficial ownership data, offers a range of solutions to support risk management and compliance programs specific to Swiss regulations.

Conclusion

The changes announced by Switzerland demonstrate the country’s commitment to strengthening its anti-money laundering and counter-terrorism financing measures. As financial institutions navigate these reforms, it is essential that they prioritize effective due diligence, robust AML/CFT programs, and regular monitoring of progress made in implementing these measures.

At Moody’s, we are well-equipped to support your organization’s AML/CFT program for risk management and compliance. Our expertise and reputation in the banking and financial industry can provide valuable insights and lend credibility to your due diligence process. Please get in touch with us to discuss how we can support your organization’s needs.