Switzerland, renowned for its financial stability and privacy, is undergoing significant regulatory changes impacting how money is managed and monitored within its borders. These shifts are driven by international pressure to combat financial crime and increase transparency. This article explores key developments affecting Switzerland’s financial landscape.
Enhanced Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) Measures
Switzerland is actively strengthening its AML and CFT framework. Following its 5th round of mutual evaluation by the Financial Action Task Force (FATF), the country is committed to improving the implementation of its measures and regularly reporting its progress. Potential changes include further defining guidance on due diligence and potentially expanding the scope of obliged entities, aligning with the EU’s 6th anti-money laundering directive.
Proposed Ban on Hamas and Related Organizations
In early 2024, the Swiss government proposed banning Hamas and affiliated groups, aiming to prevent terrorism and deter the use of Switzerland for terrorist financing. This proposal reflects a broader global effort to curb terrorist activities and their financial networks. The Wolfsberg Group, based in Basel, further reinforced this initiative by advocating for globally coordinated lists of suspected terrorists and terrorist organizations, potentially leading to enhanced CFT controls for financial institutions.
Increased Enforcement Actions and Focus on Sanctions
Swiss authorities are intensifying enforcement actions against financial misconduct. In 2023, a substantial 7.7 billion Swiss francs in assets were frozen, a fraction of the estimated 150 billion francs of Russian money held in Swiss banks. Sanctions circumvention and evasion remain a key focus for regulators in 2024. The US Department of Justice’s $123 million fine against Pictet in December 2023 for facilitating tax evasion highlights the scrutiny placed on due diligence practices and the increasing international focus on tax evasion as a predicate offense to money laundering.
Transparency Register for Beneficial Owners (TLEA)
A proposed Federal Act on the Transparency of Legal Entities (TLEA) aims to establish a transparency register revealing the beneficial owners of legal entities. This significant change, anticipated to impact approximately 500,000 legal entities, targets shell companies and their potential misuse. The TLEA mandates legal entities to identify, record, and update beneficial ownership information, placing responsibility on shareholders and beneficial owners for disclosure and data accuracy.
Key Implications of the TLEA
The TLEA will require legal entities to:
- Determine and record beneficial owner details, including full name, birth date, nationality, residence, and control details.
- Regularly review and update this information with supporting documentation accessible in Switzerland.
Shareholders will be obligated to:
- Divulge beneficial ownership data to the legal entity within one month of acquiring a stake or control.
- Provide information and proof confirming the beneficial owner’s identity and role upon request.
Beneficial owners will be required to:
- Declare their ownership and any changes within one month, either to direct shareholders or the legal entity.
- Provide necessary information and evidence to authorities, along with any third parties in the control chain.
The TLEA defines a beneficial owner as any individual, directly or indirectly, alone or with a third party:
- Holding at least 25% of the capital or voting rights; or
- Exercising control through other means.
A 2024 Moody’s study highlighted red flags among Swiss registered companies, including atypical directorship, jurisdictional risks, and financial anomalies, underscoring the need for increased transparency.
Conclusion
Switzerland’s financial landscape is evolving rapidly. These regulatory changes signify a commitment to international standards and a proactive approach to combating financial crime. While maintaining its reputation for stability, Switzerland is adapting to a global environment demanding greater transparency and accountability in financial matters. These ongoing developments will continue to shape the future of Switzerland Money.
