Financial Crime World

Switzerland’s Robust Anti-Money Laundering Framework: FINMA’s Role in Supervising Financial Intermediaries

Switzerland is known for its stringent measures against money laundering. The country’s commitment to this issue is evident through its criminalization of money laundering and the implementation of the Anti-Money Laundering Act (AMLA). In this article, we explore Switzerland’s approach to preventing money laundering and FINMA’s role in supervising financial intermediaries.

Criminalizing Money Laundering and the Anti-Money Laundering Act (AMLA)

Switzerland places a high priority on combating money laundering, making it a criminal offense punishable by the Swiss Criminal Code (Art. 305bis). In addition, the Federal Act on Combating Money Laundering and Terrorist Financing in the Financial Sector (AMLA) compels financial intermediaries to adhere to due diligence and disclosure requirements.

FINMA’s Role in Enforcing Money Laundering Regulations

Supervising Financial Intermediaries

FINMA, the Swiss Financial Market Supervisory Authority, plays a crucial role in ensuring that financial institutions comply with anti-money laundering laws. FINMA supervises and monitors various financial service providers, including banks, securities firms, insurance companies, and organizations under the Collective Investment Schemes Act.

Scope of Regulation

The AMLA’s scope extends beyond financial institutions, with individuals and companies in the para-banking sector, like credit card companies and payment service providers, also falling under its jurisdiction. These entities must affiliate with FINMA-authorized and supervised self-regulatory organizations (SROs) to comply with anti-money laundering regulations.

Due Diligence and Disclosure Requirements for Financial Intermediaries

All financial intermediaries, whether supervised by FINMA or an SRO, must comply with a range of due diligence and disclosure requirements. These include, but are not limited to:

  1. Identifying Partners and Beneficial Owners: Verifying the identity of contracting partners and identifying beneficial owners of assets brought in.
  2. Scrutinizing Suspicious Activity: Investigating unusual business relationships or transactions that may originate from criminal activity or terrorism financing.
  3. Implementing Organizational Measures: Implementing internal directives, staff training, and inspections to prevent money laundering and terrorism financing.

When suspicious activity is detected, financial intermediaries must report it to the Money Laundering Reporting Office (MROS) of the Federal Department of Justice and Police. FINMA may also engage recognized audit firms to assist in monitoring compliance among its supervised institutions and conduct on-site inspections when necessary.

Serious Violations and Regulatory Consequences

Serious violations of money laundering legislation result in prompt action from both the SRO and FINMA. The SRO is responsible for taking commensurate countermeasures and may also impose fines for irregularities. If the SRO identifies serious legal violations, it must inform FINMA immediately. In such cases, FINMA takes swift measures to restore compliance.

Industry-Specific Regulations

In addition to the requirements outlined above, institutions subject to prudential supervision must comply with industry-specific anti-money laundering regulations. Differing regulations apply to banks and securities firms, insurance companies, and independent portfolio managers and trustees.

Customized Regulations for Banks and Securities Firms

Banks and securities firms must comply with the special provisions of the “Agreement on the Swiss banks’ code of conduct with regard to the exercise of due diligence (CDB 20)” of 13 June 2018. Violations of this code can result in fines of up to CHF 10 million, depending on the severity.

Regulations for Insurance Companies

Insurance companies may choose to be supervised by FINMA or affiliated to the SRO-SIA. The SRO-SIA regulates its members’ compliance with money laundering requirements on FINMA’s behalf. The SRO-SIA may caution its members or impose fines up to CHF 1 million for irregularities.

Regulations for Fund Managers, Asset Managers, and CISA Investment Companies

Fund managers, asset managers of collective investment schemes, and CISA investment companies are required to adhere to CDB 20 rules, identical to those for banks and securities firms, in verifying the identity of contracting partners and identifying beneficial owners.

Regulations for Independent Portfolio Managers and Trustees

FINMA authorizes and supervises independent portfolio managers and trustees, with the SRO responsible for monitoring their anti-money laundering measures. AMLO-FINMA applies to these entities, and the SRO must inform FINMA about serious violations. FINMA takes the necessary measures to restore compliance.

Switzerland’s commitment to combating money laundering is evident through its robust financial framework and the effective role played by regulators like FINMA, SROs, and SIA. This commitment has not only ensured the credibility of the Swiss financial sector, but it has also made Switzerland a trusted global financial hub.