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Switzerland’s Anti-Money Laundering Reforms: A Step Towards Enhanced Compliance and Risk Management

octobre 19, 2023
/
3min read

Switzerland has recently proposed a new series of reforms to strengthen its legal infrastructure related to anti-money laundering (AML) amidst extensive criticism. A criticism that stems from the country’s controversial application of sanctions against Russia, which has led observers to question its overall lack of transparency. And as we all know, without transparency, the effectiveness of sanctions becomes severely compromised.

This move involves two primary measures that aim to enhance compliance and risk management across both private and public organizations.

Beneficial Owner Register: A Key Component in AML Frameworks

Akin to some of the directives of the Corporate Transparency Act in the USA, the first measure involves the establishment of a register for beneficial owners, to which only  authorized institutions will have access.

Switzerland, as a non-EU member, is not subject to EU regulations, including the 4AMLD, which mandates the establishment of ultimate beneficial owner (UBO) registries. Therefore, Switzerland was the last country in Europe without such a register. 

Maintaining a record of beneficial ownership is crucial to strengthening AML frameworks, but there is a need for further guidance to bolster its effectiveness, namely on the following aspects :

  1. Data quality: Being able to cross-verify the information found in beneficial owner registers with shareholder data is critical to the overall quality and reliability of the data.
  2. Access: Given the growing diversity of the financial ecosystem, it is imperative to acknowledge the roles fintech firms and technology service providers play in combating financial crime. Therefore, granting them a level of access to these registers that supports their efforts in this direction, could prove beneficial.

Strengthening KYC Requirements for Service Providers

The second measure of Switzerland’s proposed legal reforms, driven by international pressure, aims to solidify the obligation of specific groups of service providers, including lawyers and accountants, to execute Know Your Customer (KYC) procedures and comply with suspicious activity reporting regulations.

These reforms not only signal Switzerland’s responsiveness to evolving AML frameworks but also underscore the prevailing trends in the global AML landscape.

Square Facts: A Partner in Navigating Regulatory Compliance

Rigorous KYC procedures are essential for all customers, given their mandatory nature, but they prove crucial for high-risk accounts. 

As per FATF’s 40 recommendations, KYC measures should be proportional to the risks, entailing  Enhanced Due Diligence (EDD) for high-risk third parties and at least simplified KYC procedures for low to medium risk customers. The interpretative note to FATF’s recommendation number 10 (Customer Due Diligence) outlines various measures, including gathering additional customer information or checking the customer’s source of funds.

The risk level depends on many factors, some of which are quite objective. For instance, dealing with a (former) politically exposed person (PEP) or someone residing in a high-risk jurisdiction, will automatically make them a high-risk third party. 

When handling such high-risk clients, it becomes imperative to conduct detailed customer identification, verification checks, and third-party screening. 

Square Facts uses advanced technology to streamline compliance processes and make them more efficient, covering the entire risk spectrum. 

For quick and efficient entry-level due diligence, our Simplified Compliance utilizes artificial intelligence and machine learning to eliminate errors and provide real-time monitoring and updates. But when it comes to high and critical-risk clients, Enhanced Due Diligence (EDD) requires thorough human review. Our team of experts seamlessly complements our cutting-edge technology, enabling us to provide this service on a global scale, accessible through either our Enhanced Compliance service or our Investigative Compliance.

 

To learn more about how we can support your organization in its journey towards effective risk and compliance management, feel free to contact me directly at dshepherd@icover-services.com.

 

Note: The information in this blog post is based on the proposed reforms in Switzerland’s laws against financial crimes. Final implementation may be subject to further consultation and approval.

 Source: Switzerland proposes new reforms to laws against financial crime

Diane Shepherd, Director of Strategy and Partnerships at Square Facts.

Diane Shepherd is the Director of Strategy and Partnerships at Square Facts.
She recently rejoined the world of Risk-Management and Compliance after a year and a half working in the finance sector in London, UK, where she lives.
Her versatile career allowed her to explore various industries and geographies, imparting her with a unique and refreshing perspective on all things ESG, Compliance and Risk Management. Diane is also responsible for business development strategies in EMEA and APAC at iCOVER, thanks to her extensive experience in Investigative Intelligence and Background Screening.

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