Switzerland’s Financial Centre Takes a Tough Stance on Preventing Money Laundering

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Switzerland’s Financial Market Supervisory Authority (FINMA) has been focusing on institutions’ reporting systems and risk management in 2017 as part of its efforts to combat financial crime. The country’s export-oriented and internationally networked financial centre requires consistent compliance with measures designed to prevent criminal financial activity.

Anti-Money Laundering Act (AMLA)

One key measure is the AMLA, which prescribes a reporting system that is crucial for Switzerland’s fight against money laundering. Market participants involved in criminal activity are less likely to bring illicit funds into Switzerland if they know that financial institutions will report suspect funds to the Money Laundering Reporting Office Switzerland (MROS).

Supervision and Enforcement

FINMA has been stepping up its supervision and investigations of reporting under AMLA, conducting 23 on-site supervisory reviews in 2017. The authority also filed criminal charges in seven instances based on contravention of the reporting obligation in Article 9 in conjunction with Article 37 AMLA.

Good and Bad Practices

In addition, FINMA imposed its own enforcement measures in several cases and encountered good and bad practices during its supervisory and enforcement activity last year.

• Good Reporting Conduct: Financial intermediaries conduct their own enquiries after criminal proceedings are initiated against a client due to a serious offence. They then submit reports if they cannot exclude the possibility that assets in question are connected to the offence.
• Poor Reporting Conduct: Financial institutions fail to regularly check their client base against external databases or delay reporting suspicious transactions.

Risk Management

FINMA also highlighted the connection between risk management and financial intermediaries, noting that only careful selection of criteria for assessing high-risk business relationships can help identify legitimately suspicious activity and report it to MROS.

Challenges in Managing High-Risk Business Relationships

The authority’s supervisory experiences showed that some financial institutions have difficulty managing large numbers of high-risk business relationships with current compliance resources. Others may carry out inadequate risk assessments, leading to low proportions of high-risk business relationships.

Transaction Monitoring

FINMA observed positive examples such as scenario-based approaches and negative ones like failure to update internal sanction lists for terrorism financing.

Conclusion

The authority’s findings emphasize the importance of effective reporting systems, risk management, and transaction monitoring in preventing money laundering. As Switzerland continues to strive for financial integrity, it is clear that a tough stance on combating financial crime will remain a key priority.