We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
27 August 2018
On 1 June 2018 the Federal Council initiated the consultation on a number of amendments to the Anti-money Laundering Act. The draft bill marks the third bundle of legislative measures to comprehensively implement the recommendations of the Financial Action Task Force in its latest mutual evaluation report on Switzerland.(1)
As a first step, on 4 September 2017 the Financial Market Supervisory Authority published a draft amendment to its anti-money laundering ordinance that introduced:
The revised ordinance is scheduled to come into force in 2018.(2)
A second bundle of legislative measures that focused on increasing the transparency of legal entities and proposed abolishing bearer shares was published for consultation on 17 January 2018.(3)
The consultation draft(4) of 1 June 2018 proposes the following key amendments to the Anti-money Laundering Act:
The consultation draft also addresses the risk of non-profit organisations (eg, associations) being misused for financing terrorism or money laundering.(8) Associations which are mainly involved in collecting or distributing assets abroad for charitable purposes must now be entered in the commercial register. In addition, the Federal Council may extend the duty of registration to other associations which it considers particularly at risk of being misused.
Further, the consultation draft repeals the right to report suspicion of money laundering under Article 305ter(2) of the Penal Code. Over time, Swiss court practice has constantly lowered the threshold triggering the duty to report suspicious transactions and relationships under Article 9 of the Anti-money Laundering Act, which has made the distinction between reporting rights and reporting duties increasingly blurred and confusing.(9)
In the interest of a coherent suspicious activity reporting system, the government has suggested eliminating reporting rights. Henceforth, even where there is a vague initial suspicion of unlawful conduct, financial intermediaries will have a duty to report, unless inquiries and background checks pursuant to Article 6 of the Anti-money Laundering Act clearly show that the suspicion is unfounded.
The most far-reaching amendment to the Anti-money Laundering Act is the extension of its scope to include certain service providers (defined in the consultation draft as 'advisers'). These services comprise:
Advisers' due diligence duties are set out in a general manner in Article 8b of the consultation draft.(10) When establishing a business relationship, advisers must verify customers' identities and establish beneficial owners' identities.(11) Further, advisers must keep records pursuant to Article 7 of the Anti-money Laundering Act and clarify the economic background and purpose of their customers' requested services.
Advisers which are unable to comply with their due diligence duties must not enter into or terminate business relationships with customers.(12) Equally, advisers must terminate business relationships if they know or have reasonable grounds to suspect that a business is connected to:
Failure to terminate the business relationship carries a fine of up to Sfr500,000.(14) The consultation draft does not foresee a specific duty for advisers to report suspicious transactions or relationships to the Money Laundering Reporting Office (in contrast to financial intermediaries and traders, which are subject to a respective duty pursuant to Article 9 of the Anti-money Laundering Act). However, the government's explanatory notes to the consultation draft underline that advisers should consider reporting criminal conduct to the Swiss penal prosecutions authorities pursuant to the Code of Penal Procedure.(15)
The proposed extension of the Anti-money Laundering Act's scope to include advisers marks a significant and highly problematic step. The looming clash of advisers' loyalty and (professional) secrecy duties on the one hand and the implied duty to share KYC and mandate-related information with prosecution authorities in case of suspected criminal conduct on the other will require thorough consideration.
For further information on this topic please contact Bernhard Loetscher or Nino Sievi at CMS von Erlach Poncet Ltd by telephone (+41 44 285 11 11) or email (firstname.lastname@example.org or email@example.com). The CMS von Erlach Poncet Ltd website can be accessed at www.cms.law.
(1) The report of 7 December 2016 is available here.
(2) For further details please see "Fallout of FATF mutual evaluation report on Switzerland".
(3) For further details please see "Proposed implementation of FATF and Global Forum transparency recommendations meets stiff opposition".
(4) The consultation draft is available in German, French and Italian.
(9) See the explanatory report to the consultation draft (available here) at 17.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.