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Switzerland to impose highest AML standard in Europe

Switzerland to impose highest AML standard in Europe

The Swiss Government has drafted new anti-money laundering regulations which will impose a higher standard than the rest of Europe.

The new rules will hold lawyers, consultants and banks to a higher degree of accountability for reporting, scrutinising and controlling risks, as well as stepping up oversight of legal entities such as trusts. The regulations are set to be presented to parliament in 2024 following a consultation.

Switzerland has long had a reputation as a locale for criminals to stash their cash, but is attempting to fight this stereotype. The country routinely exchanges bank account information with over 100 countries. Despite this, it still faces international pressure to give more insight into the world of corporate ownership, where the real beneficiaries' identities are concealed.

If the new rules are accepted, lawyers, accountants and other company consultants who set up trusts, holding companies, or arrange real estate deals, will also become subject to due diligence rules and reporting obligations. There will also be tightened obligations to scrutinise and control risks of potential sanction violations from clients, a major point of international interest since Russia’s invasion of Ukraine.

A central registry to track who legally owns entities has been proposed alongside these regulations. The new register, to be held at the Federal Department of Justice and Police, would detail the beneficial owners of companies and other legal entities, with a body within the finance ministry carrying out checks on the registry and, if necessary, imposing sanctions.

Under the proposed rules, all future real estate deals would also be subject to due diligence scrutiny, while cash payments for precious metals and gemstones, such as gold and diamonds, would be subject to money laundering checks above a value of 15,000 Swiss francs ($17,055.14), down from the current threshold of 100,000 francs.

Dr Henry Balani, global head of industry and regulatory affairs for Encompass Corporation, commented: “The continuing global attention on financial crime and sanctions has forced regulators to up their game with regards to money laundering regulation, with Switzerland the latest example to level up its economic crime agenda. We’ve seen in the UK, for example, the introduction of the Economic Crime Bill as a direct result of public pressure against Russian Oligarchs, sparking a closer inquiry into ownership structures and it’s important that this approach spreads through to European countries to bolster the response to economic crime, with regulation a key component.”

Chrisol Correia, chief strategy officer at Facctum added: "Switzerland's announcement that it will clampdown on money laundering activity is welcome news, but a move that is certainly long overdue. While these new measures are a step forward, their success will rely on whether regulations are, enforced consistently, and if penalties are sufficiently severe to be deterrents to breaking the law. The nation’s approach to AML has been criticised in the past as being too lax and the country has recently come under increased pressure to enforce tighter controls in the context of international measures to implement financial sanctions on Russia’s economic interest.

“If these measures are to be effective, Switzerland’s regulators will need to put into action a firm stance on financial crime and make sure that financial institutions are acting with urgency to implement a new culture that supports a new approach to financial crime countermeasures. This includes, for example, introducing tougher requirements on customer due diligence and more transparency in the declaration of beneficial ownership.

“Following this announcement, we expect Switzerland’s international partners will be watching to see if the new measures come with real teeth, notably additional supervisory capacity and improved enforcement capability. Many will be looking for early signs of an intent to pursue money launders and their assets with new urgency and aggression.”

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