Facts and challenges of the AML-Revision

in Financial Services, Legal, 14.07.2015

The adaption to the recommendations of the Financial Action Task Force (FATF) required the most comprehensive revision of the Swiss Anti Money Laundering regulation since 1998. Based on the amended Anti-Money Laundering Act (AMLA), FINMA fully revised the FINMA Anti-Money Laundering Ordinance (AMLO-FINMA). AMLA and AMLO-FINMA will enter into effect on 1 January 2016 and bring several changes.

The alignment of the Swiss legislation to the FATF recommendations causes a full revision and expansion of the existing rules. Not all financial intermediaries will be affected to the same extent. However, you should focus on the following novelties:

  • The concept of “Controller”: Financial intermediaries have to establish the natural person(s) (certain exceptions may apply) behind unlisted operationally active legal entities and partnerships (stake of 25% or more). If no such person can be determined, the entity or partnership has to disclose the person in actual control of the respective entity or partnership.
  • Reporting requirements: The rules no longer require the freezing of the accounts after having filed a Suspicious Activity Report, with the exception of Terrorisms Finance. Instead, the financial intermediary has to execute all financial transactions requested by the reported client, while maintaining a comprehensive paper trail.
  • Special requirements for CISA institutions (fund management companies, CISA investment companies, CISA asset managers): CISA institutions have to identify the subscriber of fund units (subscription exceeding CHF 25,000) and the controller or beneficial owner. Alleviations for due diligence requirements are possible if certain prerequisites are met.
  • New payment methods: Alleviations are foreseen concerning due diligence requirements for payment service providers offering cashless payment transactions. The cashless payments of goods and services to professional dealers in Switzerland, for example that do not exceed CHF 5,000 a month and/or CHF 25,000 a year can be made without formal client identification.

The revision of the AMLO-FINMA has to be considered in the context of the comprehensive revision of the Swiss Anti Money Laundering regulation:

AML timeline

 

 

(Source: KPMG, click graphic to enlarge)

To comply with all new Anti-Money Laundering requirements from the various amended laws and regulations, it is crucial for financial intermediaries to adapt their existing procedures in particular relating to:

  • the identification of serious tax crimes, newly qualifying as a predicate offence to money laundering;
  • Money Laundering Reporting Office Switzerland (“MROS”) reporting duties;
  • definitions and the handling of politically exposed persons (PEP), as domestic politicians and executives of intergovernmental organizations and international sport associations are defined as PEP; and
  • the establishment of the beneficial owner and the completely new concept of “Controller”.

Further, CISA-asset managers have to pay attention to the new duty to identify the subscriber of fund units and the controller or beneficial owner, as soon as the subscription exceeds CHF 25,000.

Aside from the impact on financial intermediaries, amendments to AML laws and regulations will also affect natural persons and legal entities, which on a professional basis trade with goods and accept cash payments.

In case the cash receivables exceed CHF 100,000, either a financial intermediary has to be involved or own anti-money laundering policies and procedures have to be defined and established.

Considering the tight timeline, financial intermediaries and professional dealers in goods are required to act now and to update their internal processes, directives, IT-systems and to conduct required employee trainings.

 

 

Further information: