Swiss Banking Law & Regulations
Please be advised that most of the Swiss laws and regulations are unavailable in English. The official languages in Switzerland are German, French and Italian. Therefore, English translations are unofficial and to be treated with care.
The legal basis for the financial sector in Switzerland is not uniformly made and therefore not easy to find. There is no regulator for the entire sector like it is in the UK with the Financial Services Authority and the Bank of England responsible for systemic risks. Various authorities are involved at different levels with different types of law and regulation. Primarily responsible are the Federal Department of Finance FDF, as well as the Federal Office of Private Insurance FOPI and the Money Laundering Control Authority MLCA, together with the Swiss Federal Banking Commission SFBC. In addition to the Swiss constitution, federal law, ordinances and regulatory powers, this regulatory framework includes a variety of forms of enactment from financial market supervisory authorities, such as directives, circulars and bulletins. These are supplemented by self-regulating rules that vary in their regulatory scope. Some are based on a delegation of law-making powers, others acquire a quasi-statutory nature through recognition as a minimum standard by the supervisory authority, while others have the significance of rules of professional conduct like the Code of conduct of the Swiss Association of Asset Managers SAAM. In addition to the non-binding standards in the financial sector under international law, at the international level one finds various bilateral and multilateral agreements relevant to financial markets from a legal point of view, for example the Bilateral Agreements with the EU, double taxation treaties, or the various Hague Conventions.
Since the early seventies until 1998 only the banks were subject to the Code of conduct on due diligence and the money laundering policy by virtue of an agreement between the members of the Swiss Bankers Association, a self-regulatory body. The "Federal Act on the prevention of money laundering in the financial sector"(AMLA) entered into force on 1 April 1998 and imposes the same principles to the entire financial sector.
This act serves as a supplement to the provisions of the criminal code. It applies equally to all financial intermediaries. That means any person who, on a professional basis, accepts, maintains deposit of or helps to invest or transfer assets belonging to a third party. Financial intermediaries are banks, fiduciaries, asset managers, securities dealers, fund manager, lawyers, money changers and others.
The act imposes on financial intermediaries new organisational duties and risk approach based due diligence like staff training programs, internal directives and controls, verify identity of the contracting partner, establishing the beneficial owner, clarification of the economic background of clients and transactions that appears unusual. Financial intermediaries shall formulate risk criteria to identify business relationships which involve higher legal or reputational risks according to the know-how of the staff members and according to the structure of the client base. The regulatory framework is risk approach based. That means that the intensity of due diligence is subject to the risk exposure of the relationship with the client or to the risk exposure of the transaction triggered by the client. The license is subject to the quality of the CV’s of the key staff members. They have to grant for an irreproachable business activity.
In case of an unusual transaction like a cash transaction in a substantial amount, or if there are signs that point to possible money laundering, additional inquiries must be undertaken. A list of unusual and sensitive transactions helps to increase employee awareness. Special care must be taken with funds that are known or presumed to come from the corruption or the abuse of public property, particularly for funds of clients who exercise important official functions abroad or in firms with which they have close ties. Entering into business relations with politically exposed persons is not per se prohibited but subject to a decision made by the senior management and on the watch list of the compliance officer. A special transaction monitoring system has to be put in place.
In accordance with this law, all financial intermediaries are obliged to inform the Money Laundering Reporting Office MROS when, in a business relationship, they know or presume, on the basis of sound evidence, that money laundering is taking place.
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