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Financial Institutions Must Verify Signatory Representation and Conduct Enhanced Due Diligence

In order to prevent money laundering and terrorist financing, financial institutions are now required to verify the signatory representation of legal persons and conduct enhanced due diligence on high-risk transactions.

Verification of Signatory Representation

According to Article 5 of the Signature Act, financial institutions must ensure that the certificate representing the signatory is no older than 12 months. The certificate must be issued in accordance with Article 5, paragraph 1 (d) or paragraph 2 of the Act.

• The degree of detail required for this information will depend on the risk involved in the business relationship.
• Financial institutions are also required to maintain a business profile for each client, which includes information such as:
  • Contracting party and beneficial owner
  • Authorized agents
  • Economic background
  • Profession and business activity
  • Intended use of assets

Enhanced Due Diligence on High-Risk Transactions

Financial institutions are required to conduct enhanced due diligence on high-risk transactions, which involve higher risks within the meaning of Article 11 (1) of the Act. This includes:

• Verifying the identity of the contracting party using additional documents
• Clarifying the origin of assets deposited
• Clarifying the intended use of withdrawn assets

Risk Countries and Intensive Monitoring

Countries whose measures to combat money laundering and terrorist financing do not meet international standards are considered “risk countries”. Transactions with contracting parties or beneficial owners from these countries must be subject to more intensive monitoring, regardless of the transaction value. The threshold for such monitoring is 15,000 francs or more.

Conclusion

Financial institutions must take a proactive approach to preventing money laundering and terrorist financing by:

• Verifying signatory representation
• Conducting enhanced due diligence on high-risk transactions
• Maintaining accurate business profiles

Failure to comply with these regulations can result in severe consequences, including fines and reputational damage.