Anti-Money Laundering in Switzerland - Quick overview
Swiss anti-money laundering legislation has undergone numerous changes in recent years.
Indeed, under the impetus of the Financial Action Task Force (FATF), in its periodic reports on Switzerland, numerous revisions of the Anti-Money Laundering Act (AMLA) were made these previous years.
The latest one was adopted this year. One of the FATF's recommendations was that lawyers, trustees and fiduciaries should report money laundering to the MROS (Money Laundering Reporting Office Switzerland) when they are acting as counsel and not as financial intermediaries.
As it stands, this recommendation has not been followed by the Parliament.
The following is a summary of the most important changes or refinements to existing practices in light of the AMLA:
- Obligation to verify the beneficial owner (Art. 4 AMLA) and to keep customer data up-to-date (Art. 7 para. 1bis AMLA).
- The removal of any time limit for the processing of money laundering reports by MROS (Art. 23 Para. 5 AMLA).
- A financial intermediary can now terminate the business relationship after 40 days from the notification of a case of money laundering if he still has no news from MROS on the outcome of the case (Art. 9b AMLA
These changes are expected to come into force soon (the date will be set by the government).
Two aspects govern the Swiss anti-money laundering system. The first aspect is criminal prosecution under Articles 305bis and 305ter of the Swiss Criminal Code (SCC). The second is the monitoring and reporting of suspected money laundering cases under the Money Laundering Act (AMLA).
Article 305bis SCC
According to article 305bis Section 1 of the SCC anyone who carries out an act that is aimed at frustrating the identification of the origin, the tracing or the forfeiture of assets which he knows or must assume originate from a crime or aggravated tax offence shall be liable to a custodial sentence or to a fine.
A crime for the purposes of the SCC, is an offence that carries a custodial sentence of more than three years (art. 10 par.2 SCC).
Pre-money laundering offences, commonly known as predicate offences, for which the sanction is lower than 3 years of imprisonment are therefore excluded from the scope of application of this article.
The money launderer is also punishable if the predicate offence was committed abroad, and is punishable under the laws of that country and if it is a crime in Switzerland in accordance with Art. 305bis para. 3 of the SCC.
Under the current system, money laundering the proceeds of passive private bribery (Art. 322novies SCC) would be excluded from the scope of Art. 305bis SCC, as this offence is punishable by a maximum of 3 years’ imprisonment.
A predicate offence of bribery of foreign public officials under Art. 322septies SCC, on the other hand, would fall under Art. 305bis SCC, since the maximum penalty is 5 years' imprisonment.
It is also worth considering paragraph 1bis of Article 305bis which covers the offence of forgery for evading tax as a predicate offence to money laundering, if the subtracted taxes amount to at least CHF 300,000.
It was at the instigation (or, some might say, the pressure) of the FATF that the above paragraph was added on 1 January 2016. Indeed, as forgery for tax evasion is an offence punishable by a maximum of 3 years, it was not considered a crime under Swiss law. This resulted in total impunity for predicate tax offences, since under Swiss law they are not crimes.
To summarise these conditions must be met:
- Firstly, an offence committed against a foreign tax authority must constitute a forgery for evading tax with respect to art. 186 LIFD;
- Secondly, the tax evaded in the tax period must exceed the equivalent of CHF 300,000 in foreign currency;
- Thirdly, an act intended to obstruct the confiscation of the stolen assets must have been committed (e.g. transfer to a Swiss bank account);
- Finally, the predicate offence must be punishable under the law of the country of origin.
Article 305ter Swiss SCC
Under Article 305terSCC, anyone who, as a financial operator, fails to identify the beneficial owner of assets that he has to deal with professionally, even though these assets are of lawful origin, commits a criminal offence. Conversely, the correct identification of the beneficial owner of assets of criminal origin does not lead to a violation of Article 305ter SCC.
This article applies exclusively to financial intermediaries, which means that other persons are excluded from the scope of application of Art. 305ter SCC.
An example of offence under Article 305ter SCC would be for the financial intermediary to find out in the business relationship that the beneficial owner is incorrect and not taking any steps to ascertain the true identity of the beneficial owner.
The purpose of this provision is to catch those who behave with total indifference towards identifying the beneficial owner but who cannot be punished for money laundering since this offence does not include negligence.
From the 1 January 2016 (again under pressure from the FATF), under paragraph 2 of the article 305ter SCC, financial intermediaries are entitled to report to the Money Laundering Reporting Office in the Federal Office of Police (MROS) any observations that indicate that assets originate from a crime or an aggravated tax misdemeanour in terms of Article 305bis par. 1bis.
While this provision may seem unnecessary when the AMLA already regulates the question of the identification of the beneficial owner (art. 4 AMLA) and the communication to the MROS (art.9 AMLA), this is due to the fact that the SCC predates the AMLA and the Swiss legislator never repealed it. However, while the provisions may seem to overlap, the scope of application of paragraph 2 article 305ter SCC differs from that of Art. 9 MLA (see below).
Monitoring and reporting under the scope of the AMLA
The purpose of the AMLA is to impose on all financial intermediaries the rules of the banking sector regarding the identification of customers and beneficial owners.
The AMLA applies to financial intermediaries (Art. 2 AMLA).
One of the cornerstones of the AMLA is the obligation to report to MROS in the event of reasonable suspicion that assets originate from a crime (Art. 9 AMLA).
The differences between Art. 305ter SCC and Art. 9 AMLA are as follows:
- For Art. 305ter SCC, a probability, a suspicion or even a feeling of unease about the continuation of the business relationship is sufficient to give the financial intermediary the possibility to report to MROS.
- For Art. 9 AMLA, much more concrete evidence is required, and only in this case does the law establish an obligation to report.
The financial intermediary who fails to comply with the duty to report in terms of Article 9 is liable to a fine not exceeding CHF. 500,000 (art. 37 AMLA).
Art. 4 AMLA also contains an obligation to verify the beneficial owner with the level of due diligence required by the circumstances. The obligation in this article is similar to that of Art. 305ter SCC, with the difference that the AMLA requires, in accordance with Art. 5, the renewal of the identification in the event of doubts arising in the course of the business relationship.
The MROS plays a central role in the obligation of reporting by financial intermediaries. Upon receiving a report, it must notify the responsible prosecution authority immediately if it has reasonable grounds to suspect that an offence under art. 305bis and 305ter SCC has been committed according to the information provided by the financial intermediary (art. 23 AMLA).
Swiss anti-money laundering legislation is constantly evolving. It is obvious that each change is linked to the FATF recommendations. This may result in legal uncertainty, especially for Swiss financial actors who have to adapt to changes more frequently than in other countries. There is no doubt that we will see legislative changes again in the fight against money laundering, but it is not certain that these will be initiated by the Swiss legislator.
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