Switzerland AML money laundering

Switzerland is a country renowned for its sovereignty and neutrality, which has been respected by all countries. Because of Switzerland’s determination not to take sides in any international conflict or dispute, it has been long been regarded as a safe haven for foreign investors because of its political and economic stability.

Unfortunately, the desirability of a Swiss bank account has been known to draw an unsavory element in the form of organized crime groups, foreign dictators, and other disreputable types. This resulted in Switzerland becoming an attractive place for money launderers over the years.

In response to the growing concern of money laundering, the Swiss government established a regulatory mechanism known as the Agreement on Due Diligence (CDB) in 1977. In order to better coordinate the efforts of banking and financial regulators, the Swiss Financial Market Supervisory Authority (FINMA) was formed in 2007 by combining three existing regulatory agencies responsible for private insurance, banking, and anti-money laundering control. There are also a number of self-regulatory organizations (SROs) that act under the supervision of FINMA to ensure compliance of its members with due diligence requirements.

Although Switzerland has been actively revising and updating its anti-money laundering (AML) compliance regime in order to keep up with changes in the regulatory landscape, there has been increasing international pressure for the financial powerhouse to toughen its money-laundering rules. In particular, the AML task force of the Organization for Economic Development (OECD) has urged its member countries, including Switzerland, to tighten their regulations or risk being placed on a blacklist of non-compliant countries.

Two of the most contentious recent regulatory changes involve cash payments and politically exposed persons (PEPs). The characteristic Swiss desire to preserve its own sovereignty and neutrality resulted in considerable debate and resistance by policy makers and high-end merchants.

According the original rules proposed by the government, any person could pay using cash for any amount up to 100,000 Swiss francs (roughly $107,000). Any transaction above that amount would have to be paid by money transfer. At first, businesses dealing in precious metals, jewelry, and other luxury items fought against this requirement, as cash is still frequently used by their clientele. As a result, a compromise was reached where buyers who wished to pay cash for purchases above the threshold could elect to identify themselves and register with the seller.

The revised rules on PEPs were initially voted down by the Swiss House of Representatives because for the first time, they would fall under this category and be subjected to increased scrutiny on their financial transactions. The federal politicians only relented after the Swiss finance minister aptly pointed out the irony of the new rules being rejected by the very people that they would apply to. Going forward, any member of the House of Representatives of the Senate will be considered a PEP like all senior foreign political figures and senior officials of sports associations that are active worldwide.

For now, the regulatory reform debate is over, but perhaps not for long. The European Union continues to introduce tougher rules on cash transactions, setting maximum limit of 15,000 euros (approximately $17,000). Undoubtedly, as the rest of Europe, and indeed, other countries, keep raising the bar for due diligence, Switzerland will once again be faced with updating its regulations once more.

What do you think of Switzerland’s new tougher regulations? Do they go far enough to prevent financial crime?

Organizations and businesses transacting online with customers in Switzerland have several options available to ensure AML compliance. Trulioo’s online identity verification (IDV) service, GlobalGateway, provides instant IDV for a wide range of industries, including financial services, money service businesses, and online gaming. With the flexibility to customize rule sets, GlobalGateway helps companies to meet compliance requirements for multiple jurisdictions.