22/05/24

SWITZERLAND: Switzerland strengthens anti-money laundering framework

As published on: iclg.com, Wednesday 22 May, 2024.

New measures to tackle money laundering, tax evasion and terrorist financing are likely to come into effect in early 2026.

The Swiss Federal Council has adopted a series of measures to be submitted to Parliament proposing a significant overhaul of the country’s . The aim, as outlined by the Council, is to bolster Switzerland’s reputation and competitiveness as a finance and business centre by introducing stricter measures that align with evolving international standards. Over several decades, the central European country has earned a reputation for its opaque banking system, which has frequently made it a preferred destination for ill-gotten gains. That said, it is also the case that, in recent years, the Swiss authorities have taken steps to bring its banking regulations into line with those of more transparent jurisdictions, including actively pursuing reciprocal agreements with other countries to facilitate the exchange of information, especially with regard to tax evasion.

This latest initiative is part of the country’s shift to greater financial transparency and, in a statement, the Federal Council highlighted the threat posed by money laundering and terrorist financing to the integrity of the global financial system, writing: “An effective framework for combatting financial crime is essential for the good reputation and success of an internationally important financial centre like Switzerland.”

The proposed reforms address these concerns through several key elements, including the requirement that companies and other legal entities in Switzerland register details of their beneficial owners. A new piece of legislation, titled the Federal Act on the Transparency of Legal Entities and the Identification of Beneficial Owners, is currently in the legislative pipeline. “The register should allow law enforcement authorities to identify the true beneficiaries behind legal structures with greater speed and certainty,” explained the Council, adding that the primary objective of the register is to prevent the misuse of Swiss legal entities for money laundering or asset concealment. The register will be managed by the Federal Department of Justice and Police (FDJP) and will not be publicly accessible.

The Bill also proposes extending anti-money laundering due diligence rules to certain advisory activities, particularly legal advice, deemed to carry a high risk of money laundering. This measure builds upon a proposal previously discussed by Parliament in 2019, which identified activities such as company structuring and real estate transactions as particularly concerning. The specific regulations will, however, consider the professional secrecy obligations of lawyers and notaries for which Switzerland is globally renowned.

Following a consultation process, the responsibility for supervising the exercise of due diligence by lawyers will fall under the purview of self-regulatory organisations (SROs) operating under AML legislation, rather than regional bar associations.

The proposed reforms encompass a range of additional measures to strengthen the overall AML framework. These include measures to prevent breaches or circumvention of sanctions under embargo legislation, and the implementation of due diligence obligations on cash payments exceeding CHF 15,000 (EUR 15,145) in precious metals trading and real estate transactions, which were previously exempt.

The draft legislation, which received broadly positive feedback during a consultation period from August to November 2023, will now be presented to Parliament but is unlikely to come into force before the beginning of 2026. The Federal Council stressed that the proposed measures are fully aligned with the international standards set by the Financial Action Task Force (FATF) on combatting money laundering and terrorist financing, as well as the recommendations of the Global Forum on Transparency and Exchange of Information for Tax Purposes, the 2009-founded international body that currently boasts 171 member jurisdictions, including all EU member states, the UK, US and Switzerland itself.

Switzerland’s reputation as a stable global banking hub suffered a major blow after ailing bank Credit Suisse was taken over by rival UBS, across the world.

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Switzerland AML Anti-Money Laundering

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