Revision of the Swiss MLA - What lies ahead for Swiss banks?

After the FATF identified weaknesses as part of the country report on Switzerland in 2016, Switzerland felt compelled to undertake an intensive revision of its Anti-Money Laundering Act. The result of this revision will now finally come into force on January 1, 2023 - but what specific changes will result from this and what challenges may arise in practical implementation?

1. These issues were discussed intensively at the 10th Zurich Conference on the Anti-Money Laundering Act, which took place on October 13. In particular, there are two central core issues that can have a massive impact on financial institutions and other parties subject to money laundering obligations: "Verification of the identity of beneficial owners".
2. "Updating customer data"

CURENTIS looks at what changes will result from the partial revision of the Swiss Anti-Money Laundering Act with regard to these topics and what this could mean for those subject to money laundering obligations.

Verification of the identity of beneficial owners

On the part of the FATF it was criticized that up to now there was no general and systematic obligation to take appropriate measures to verify the identity of the customer's beneficial owner irrespective of the risk. The revised law therefore provides as of 01.01.23 in the future:

"The financial intermediary must exercise due diligence under the circumstances to identify the beneficial owner and verify the identity of the beneficial owner to ascertain who the beneficial owner is."

Here, however, the experts speak of the creation of a legal basis for a duty that already exists in Switzerland and refer to the obligation to make a declaration pursuant to 305ter StGB.

Nevertheless, the legal amendment to the AMLA has its raison d'être, as the focus is to be directed not only at identifying the beneficial owner, but also at verifying his identity. According to the message of the Swiss Federal Council, this specifically includes questioning the information provided by the customer. Obligated persons should be in full knowledge of who the beneficial owner of their client is without any doubt throughout the entire duration of the business relationship. Measures must be taken to check the plausibility of the information provided using suitable sources (e.g. knowledge from the customer profile, public information). Simply obtaining a copy of the beneficial owner's ID is not sufficient to fulfill the obligation. CURENTIS therefore assumes that Swiss money laundering obligors will have to significantly increase the number of staff they employ to check the plausibility of information on the beneficial owner in the future.

Updating customer data

Previously, the updating of data and information on the contracting party or the beneficial owner only had to be carried out if doubts arose in the course of the business relationship. However, the FATF criticized the specific lack of an explicit obligation to ensure that customer data is up to date, so that on 01.01.23 the obligation to periodically check supporting documents in accordance with Art. 7 para. 1 AMLA will come into force:

"It shall periodically review the required supporting documents to ensure that they are current and update them as necessary. The periodicity, scope, and nature of the review and update shall be based on the risk posed by the Party."

This obligation applies to all customer relationships, irrespective of risk, and guarantees the periodic and event-independent updating of data and information. At present, it has not yet been determined what specific information is involved or how the operational implementation is to be structured. Rather, obligated parties must already expect an increased number of working hours and expenses in advance in order to guarantee the implementation of the AMLA amendment.

Conclusion of CURENTIS AG:

In the context of participation in the 10th Zurich Conference on the Anti-Money Laundering Act, the uncertainty of many participants, mostly from the banking sector, regarding the concrete effects of the described changes was particularly noticeable. The verification of the identity of beneficial owners seems to be a major challenge, as it has not yet been possible to further define what the operational implementation should look like in concrete terms.

For Swiss credit institutions, a higher workload can be expected from the revision of the Anti-Money Laundering Act. In addition, the adaptation of policies, processes and controls or the implementation of technical adjustments will be required.

The concrete effects of the revision of the Anti-Money Laundering Act will only become apparent in part in practice over the next few years - CURENTIS AG is keeping an eye on this.