Financial Crime World

Switzerland Takes Strides Forward in Combating Money Laundering: New Agreements, Regulatory Updates, and Proposed Legislation

Switzerland, a global financial hub, has reinforced its commitment to combating financial crime, including money laundering, by implementing new agreements, regulatory updates, and proposed legislation.

New Agreement with Panama

Switzerland marked a significant step in dealing with criminal matters linked to financial crime with the signing of an electronic transmission treaty for mutual assistance with Panama on February 27, 2024. This is the first agreement of its kind for mutual assistance between the two countries. The aim of this agreement is to provide reciprocal support in addressing criminal matters.

Swiss Anti-Money Laundering Framework

Broad changes to Switzerland’s anti-money laundering (AML) framework have been introduced, bolstered by several international treaties and regulatory updates. The Swiss AML legislation, including the Anti-Money Laundering Act (AMLA) and Anti-Money Laundering Ordinance (AMLO), sets high-level statutory requirements and practical guidelines.

  • The AMLA: Initially enacted in 1997 and updated in 2016
  • The AMLO: Introduced in 2007

Regulatory Changes

Switzerland has enacted numerous changes to its money laundering regulations over the past few years to address its reputation as a high-risk money laundering jurisdiction.

Swiss Bankers Association (SBA) Changes

  • Revised code of conduct regarding customer due diligence (CDB 20): Published in 2020

Swiss Parliament Amendments

  • Amendments to the Money Laundering Act: Passed in March 2021, came into force on January 1, 2023
  • Changes addressed:
    • Verification of beneficial owners
    • Customer data reporting
    • Increased transparency for associations presenting a higher risk of terrorist financing

FATF Compliance Improvements

Switzerland has progressed in addressing technical compliance deficiencies identified in the 2019 Mutual Evaluation Report from the Financial Action Task Force (FATF). These improvements led to an upgrade in Switzerland’s rating for Recommendation 10 and Recommendation 40.

Ongoing Enforcement Actions

There has been an increase in enforcement actions, including asset freezes from Swiss banks holding Russian funds and investigations into tax evasion cases like the $123 million fine imposed on Pictet.

The newly proposed Swiss Federal Act on the Transparency of Legal Entities (TLEA), expected to have a vote in 2024, is anticipated to impact half a million legal entities across the nation. This legislation aims to address shell companies and their nefarious uses by introducing a mandatory transparency register for legal entities’ beneficial owners.

Beneficial Owners Disclosure Requirements

  • Direct and indirect holdings of at least 25% of the capital or voting rights, or control by other means

Conclusion

With the new agreement with Panama, ongoing regulatory changes, and the proposed TLEA legislation, Switzerland continues its efforts to combat money laundering and counter-financing of terrorism. Businesses need to ensure their ability to address these compliance and regulatory changes quickly to meet each AML/CFT requirement. Moody’s, a global provider of beneficial ownership data and expert solutions for due diligence, can support AML and CFT programs and risk management activities tailored to Swiss and international regulatory frameworks.