Money laundering in Switzerland: AML rules & regulations

Switzerland is one of the wealthiest countries in the world, with a highly developed economy and a GDP of over $800 billion. Switzerland’s financial profile is built on its banking industry which has had a reputation for secrecy and confidentiality since the 18th century. That reputation has helped Switzerland become a global banking hub, with huge sums of foreign money flowing into the country since the mid-20th century: in 2019, the Swiss Bankers Association estimated that Swiss Banks held around $8.6 trillion in assets – twice the GDP of Germany. As a global financial destination, money laundering in Switzerland is carefully monitored. 

In 2020, The Tax Justice Network ranked Switzerland third on its Financial Secrecy Index, indicating a lack of financial transparency, while several Financial Action Task Force (FATF) Mutual Evaluation Reports (MER) have highlighted ways in which Switzerland could improve its AML/CFT infrastructure. In response to the threats posed by financial criminals, the Swiss government has moved to strength its AML/CFT regulations, passing the Anti-Money Laundering Act (AMLA) and establishing the Financial Market Supervisory Authority (FINMA), an independent organization responsible for overseeing anti money laundering in Switzerland. 

Given the money laundering risk, and the potential for criminal penalties, banks and financial institutions should understand the Swiss AML/CFT landscape and how to comply with FINMA reporting regulations.

What is FINMA?

As Switzerland’s primary financial markets regulator, FINMA is responsible for supervising the country’s banks and financial institutions and ensuring compliance with its financial regulations. A major part of FINMA’s role is combatting money laundering in Switzerland under regulations set out in the Swiss Criminal Code, and in Switzerland’s primary piece of AML/CFT legislation, the Federal Act on Combating Money Laundering and Terrorist Financing in the Financial Sector – also known as the Anti-Money Laundering Act (AMLA). 

Under AMLA, FINMA requires obligated firms in Switzerland to obtain an operating license, and to comply with certain reporting and record-keeping regulations. Those regulations include establishing and verifying the identities of customers, implementing suitable screening and monitoring processes, and submitting suspicious activity reports to the Money Laundering Reporting Office (MROs) when such activity is detected.

Anti-money laundering Switzerland: AMLA updates

Following the latest FATF MER on money laundering in Switzerland, the Swiss government has made numerous changes to AMLA. The most recent of those changes were adopted in 2021 – key highlights include:

• A requirement for firms to verify the ultimate beneficial ownership of any companies with which they do business
• A requirement for firms to keep customer data up to date
• Permission for financial intermediaries to terminate business relationships after notifying MROS of potential money laundering activity but not receiving news of an investigative outcome for 40 days 
• A removal of the time limit for MROS to process money laundering reports

How to comply with AML/CFT regulations in Switzerland 

Following FATF recommendations, FINMA requires the firms that it supervises to adopt a risk-based approach to AML/CFT compliance. This means that firms in Switzerland must assess their customers individually and then deploy a compliance response commensurate with the level of risk that they face. Accordingly, high risk customers should be subject to more intensive AML/CFT controls, while low risk customers may only require simpler measures. 

With those considerations in mind, a firm’s FINMA AML/CFT compliance solution should include the following measures and controls:

• Customer due diligence: Firms should collect data on their customers in order to verify their identities and the nature of their business. Where customers are corporate entities, firms should establish ultimate beneficial ownership. 
• Transaction monitoring: Firms should implement automated transaction monitoring systems to look for signs of money laundering in Switzerland, such as unusual transaction patterns or transactions with high risk jurisdictions. 
• Sanctions screening: To detect foreign sanctions targets that are using Switzerland’s financial system to evade AML/CFT controls, firms should screen their customers against relevant sanctions lists. Switzerland maintains its own autonomous sanctions list and also enforces sanctions imposed by the United Nations Security Council. 
• PEP screening: Elected officials and government employees may have access to large amounts of public funds – and so pose a higher AML/CFT risk. Firms in Switzerland should screen their customers to find out if they are politically exposed persons (PEP), and adjust their compliance response accordingly. 
• Adverse media: Customer involvement in financial crimes such as money laundering in Switzerland may be revealed in news stories before it is confirmed officially. With that in mind, firms in Switzerland should screen regularly for adverse media stories involving their customers, including screen, print, and online sources within the scope of their search.