Switzerland
Last Updated: 23/5/2008CENTRAL AUTHORITY FOR REPORTING
- Money Laundering Reporting Office Switzerland (MROS), see
http://www.fedpol.admin.ch/fedpol/en/home/themen/kriminalitaet/geldwaescherei.html - Federal or Cantonal Criminal Authorities.
ARE LAWYERS COVERED BY ANTI-MONEY LAUNDERING LEGISLATION?
The Federal Act on the Prevention of Money Laundering in the Financial Sector (MLA) of 1 April 1998 applies to all financial intermediaries. The MLA imposes on those financial intermediaries extensive customer and beneficial owner identification, record-keeping and reporting obligations.
Lawyers are covered when acting as financial intermediaries according to Article 2 paragraph 3 MLA.
NAME LAWS REGARDING ANTI-MONEY LAUNDERING PROCEDURES
The Swiss Penal Code (PC) Articles 306 ter (criminal organisation), 305 bis (money laundering) and 305 ter (lack of vigilance in financial operations and the right of communication). The PC punishes any offence committed within the context of organised crime (money laundering, corruption, fraud, drug trafficking, etc.).
Swiss Federal Banking Commission (SFBC) Ordinance on the Prevention of Money Laundering 2003, see http://www.ebk.admin.ch/e/.
Ordinance of the Federal Control Authority (SFCA) on the Combating of Money Laundering, see http://www.gwg.admin.ch/e/
Various Ordinances to support the prevention of (i) Money Laundering and (ii) the Financing of Terrorists.
Officials from the Federal Council (the country's council of ministers and highest governing body) said the Money Laundering Act is going to be expanded to prevent terrorists from moving funds through the Swiss financial system. The government body will also discuss a range of measures to standardise the existing due diligence requirements and to improve the efficiency of the suspicious transaction reporting regime. The new rules will state that financial intermediaries, in particular banks, should report any suspicions to the Money Laundering Reporting Office of Switzerland before they have established a business relationship with the client in question.
IN ADDITION TO THESE LAWS, IS THERE ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS CURRENTLY IN PLACE?
Factual Relevance of FATF 40 + 9 Recommendations on Money Laundering.
Swiss Code of Best Practice, Internal Guidelines and Directives of Financial Intermediaries, template directives provided by self regulatory organizations (SROs), in particular the regulations of the Swiss Bar Association (SRO SBA), and KYC rules.
UNDER WHAT CIRCUMSTANCES IS A LAWYER UNDER THE OBLIGATION TO REPORT?
Article 9 of the MLA creates a reporting obligation in the presence of founded suspicions that assets involved in a business relationship or a transaction are related to a crime, are the proceeds of a crime or are under the control of a criminal organisation.
The applicable rules relating to lawyers are Article 305 bis and ter PC and the relevant provisions of the MLA. The rules are as follows: The identity of the contracting party must be established (Article 3 MLA), the economic beneficial owner must be determined (Article 4 MLA), and these identification checks must be renewed upon occurrence of suspicion or in the event the lawyer becomes aware of changes regarding the contracting party or the beneficial owner (Article 5 MLA).
Article 8 of the MLA provides that organisational measures (such as proper documentation, storage of documents, availability of information within hours) must be taken to prevent money laundering and, importantly, there is an obligation to inform MROS of any money laundering activities or suspicion (Articles 9 and 23 MLA); Article 10 MLA provides for the freezing of funds; and Article 14 paragraph 43 MLA provides that lawyers and notaries acting as financial intermediaries must be members of an approved self-regulatory body, the so-called SRO SBA
(cf.http://www.sro-sav-snv.ch/ , not available in English).
The provisions of the MLA are applicable to lawyers in cases where the lawyer acts as a financial intermediary. A lawyer who represents a client within the framework of the traditional activities of the legal profession is not subject to the MLA. In addition, to the extent a lawyer engages in what is considered "accessory work", which includes, e.g., asset management, check collection and treasury of precious metals, such lawyer will be subject to the MLA. The SFCA and the SRO SBA set out various activities that would qualify a lawyer as a financial intermediary, and thereby subject any such lawyer to the MLA, such as, e.g., a lawyer holding a power of attorney to dispose of a bank account of a client or a lawyer acting as board member of a domiciliary. It is disputed under Swiss law which specific activities of a lawyer qualify as "accessory activity"/financial intermediation. Therefore, whether a certain activity qualifies as "a traditional activity of the legal profession" or "accessory activity"/financial intermediation must be decided on a case-by-case basis.
The new rules in the expanded version of the MLA state that financial intermediaries, in particular banks, should report any suspicions to the MROS of Switzerland before they have established a business relationship with the client in question. The legislation will also give financial intermediaries clearer guidance on how to ensure that their reports to the financial intelligence unit do not breach Switzerland’s client confidentiality laws. [1]
LAWYER RESPONSIBILITY/LIABILITY
When lawyers act as financial intermediaries, Swiss law imposes a number of obligations relating to KYC due diligence (amongst others, Articles 3-8 MLA) and specific obligations applicable if there is a suspicion of money laundering (Articles 9-11 MLA). The details of such responsibility may only be determined on a case-by-case basis.
CLIENTS IDENTIFICATION AND VERIFICATION
Upon establishment of a new client relationship, whether with a natural person or an entity, subject to such mandate qualifying a lawyer as a financial intermediary, the client must be identified and the beneficial owner, if any, determined (see above). Upon commencement of the client relationship, a client history/summary is to be established and the financial intermediary shall determine whether the business relationship/transaction at hand qualifies as one entailing enhanced risks (risk-based approach). During the client relationship, transactions are to be monitored and reporting duties as summarised above apply. According to the practice applied by the SFCA, also clients with whom a business relationship has been established even before the MLA entering into force have to be duly identified and the beneficial owner must be determined.
The financial intermediary is required to identify the customer and determine the beneficial owner of the funds. Further verification of identity is necessary when at any stage of business relations, doubts arise as to identification.
The MLA provides for a special obligation of clarification of the economic background and the purpose of a transaction or business relationship when it appears unusual or raises doubts as to its legitimate nature, taking into consideration any risks (risk-based approach).
LAWYERS PROSECUTED FOR MONEY LAUNDERING OFFENCES
No information available.
HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?
Yes, in October 2005. The agency praised the country's tough stance towards politically exposed persons but criticised its reluctance to introduce rules on correspondent banking and terrorist financing. The FATF said in its report that Switzerland's banking laws had proven particularly attractive to money launderers and that most cases involved predicate crimes committed in other jurisdictions. The subsequent legislative review focused on closing the main loopholes in the existing AML regime. The government body also agreed to discuss a range of measures to standardise the existing due diligence requirements and to improve the efficiency of the suspicious transaction reporting regime. The new rules of the expanded MLA will state that financial intermediaries, in particular banks, should report any suspicions to the MROS before they have established a business relationship with the client in question. The legislation will also give financial intermediaries clearer guidance on how to ensure that their reports to the financial intelligence unit do not breach Switzerland's client confidentiality laws. [1]
Information provided by:
Dr. Adrian Kammerer, Attorney-at-Law, Partner, Niederer Kraft & Frey, Bahnhofstrasse 13, 8001 Zurich, Switzerland, adrian.kammerer@nkf.ch, phone +41 (0)58 800 8000, fax +41 (0)58 800 8080
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Sources
- Helen O’Gorman, “Switzerland prepares to implement FATF recommendations”, 7 March 2008, www.complinet.com.
