Important changes in the Money Laundering Act

On 1 June 2018, the Federal Council opened the consultation on the amendment to the Anti-Money Laundering Act (AMLA). The bill takes into account the key recommendations of the Financial Action Task Force (FATF) country report on Switzerland and is intended to enhance the integrity of the financial centre.

New regulations in the Swiss Money Laundering Act: financial intermediaries must thoroughly verify the information on the beneficial owner. (Image: depositphotos)

Data misappropriation, money laundering, reputational damage and, finally, cyber activities are challenging those in charge of larger and smaller financial institutions as far as the Anti-Money Laundering Act is concerned.In its country report, the FATF (The Financial Action Task Force on Money Laundering) 2016 a overall good quality of the Swiss system for combating terrorist financing and money laundering. At the same time, it identified weaknesses in certain areas and made recommendations.

In June 2017, the Federal Council instructed the Federal Department of Finance (FDF) to prepare a corresponding consultation draft that would also strengthen the integrity of the Swiss financial centre. The Consultation lasts until September 21, 2018.

The most important measures are listed below:

  • Due diligence requirements are to be introduced for certain services in connection with companies and trusts, mainly in the areas of formation, management and administration. Activities for operating companies in Switzerland are exempt due to their low risk. In order to ensure that the requirements are effective, an audit requirement is envisaged. There is no supervision or reporting obligation.
  • The law now explicitly obliges financial intermediaries to verify the information on the beneficial owner. This creates a basis for existing practice and enshrines what has been confirmed by case law. Furthermore, financial intermediaries should regularly check that client data is up to date. The periodicity and scope of the review will depend on the risk posed by the contracting party.
  • Associations that run the risk of being abused for the purpose of financing terrorism or money laundering must now register in the commercial register. These are associations that are involved in the collection or distribution of assets abroad primarily for a charitable purpose.

On new control and authorisation obligations

Furthermore, the consultation draft envisages improving the effectiveness of the system for reporting suspicions of money laundering and terrorist financing. To this end, the reporting law is to be repealed, as there is hardly any scope for its application. In addition, the threshold value for cash payments in the precious metals and precious stones trade is to be lowered and a licence requirement introduced for the purchase of precious metals.

Depending on the case, the new audit procedures could cost the Swiss economy more. "According to experts, if two companies have the same number of clients but different levels of complexity, the company with the more complex cases may incur up to two to four times higher supervision costs, as the examination of a dossier is correspondingly more time-consuming," states the "Explanatory Report on the Consultation Draft" of 1 June 2018 on the "Amendment to the Federal Act on Combating Money Laundering and Terrorist Financing".

The cost of supervision is also higher in highly automated business areas (such as payment systems), where entire IT systems must be audited, than when the controls are primarily manual.

To coincide with the opening of the consultation process, the KGGT is publishing the report "Money Laundering Risks in Legal Entities". This analyses the risks associated with various legal forms in Switzerland and abroad and underpins the proposed measures of the bill in the area of services for companies and trusts.

Below you will find the two dossiers mentioned for consultation, respectively new regulations in the area of "money laundering":

 

 

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