Federal Council launches two consultations on combating money laundering and on enhanced due diligence requirements in the area of taxation

Bern, 27.02.2013 - During its meeting today, the Federal Council adopted two consultation drafts. On the one hand, the revised international recommendations on combating money laundering and terrorist financing are to be implemented. On the other, extended due diligence requirements should prevent untaxed assets from being accepted by financial intermediaries in Switzerland. With these bills, the Federal Council is underscoring the importance that it attaches to preserving the integrity of the financial centre. Both consultations will run until 15 June 2013.

Revised anti-money laundering recommendations

The Federal Council has presented proposals to improve the combating of money laundering. The revised recommendations of the Financial Action Task Force (FATF) of February 2012 should thus be implemented. Switzerland contributed actively to the elaboration of these recommendations.

Effectively preventing financial sector abuses for criminal purposes is a prerequisite for a successful financial centre. The Federal Council therefore attaches great importance to preserving the integrity of the the Swiss financial centre. Switzerland has been continually expanding its mechanisms in this area over the past few decades. Its anti-money laundering regulations are already largely compatible with the new FATF standards. However, certain adjustments are needed in order for the revised recommendations to be effectively implemented in Switzerland and for some of the still unresolved deficiencies identified during the FATF country evaluation of 2005 to be remedied.

The key points provided for in the bill are as follows:

- Introduction of a disclosure obligation for holders of bearer and registered shares of unlisted companies in order to enhance the transparency of legal entities, and extension of the due diligence requirement for establishing the identity of beneficial owners. The proposed measures should also meet the requirements of the Global Forum.
- Duty to verify identity and risk-based due diligence requirements for politically exposed persons in Switzerland and international organisations.
- Introduction of a new predicate offence to money laundering in the form of qualified tax fraud in the area of direct taxation and extension of the existing predicate offence in the area of indirect taxation.
- Purchases of real estate and movables may be paid for in cash only up to a sum of CHF 100,000. It is mandatory for payments of larger sums to be processed via a financial intermediary subject to the Anti-Money Laundering Act (AMLA).
- The effectiveness of the reporting system is to be increased and the procedures for financial intermediaries will be simplified.

Also in connection with the implementation of the revised FATF recommendations, the Federal Department of Finance (FDF) was instructed today to submit the necessary legal adjustments regarding the freezing of the assets of terrorists and terrorist organisations to the Federal Council.

Enhanced due diligence requirements

This bill is part of the Federal Council's financial centre strategy and enshrines enhanced due diligence requirements for financial intermediaries in the AMLA. The due diligence requirements call for a risk-based assessment, which should prevent the acceptance of untaxed assets. Here, the most important indicators of increased risk are enshrined in the law. They can arise, for example, from a client's wish for greater discretion or for investments to be carried out in complex structure without any reasonable justification. The law likewise sets out indicators of when financial intermediaries can assume a reduced risk, for example if there is an international double taxation agreement between the client's country of domicile and Switzerland. A credibly designed self-declaration can also constitute a strong indicator of tax-compliant behaviour. The details are to be set out in self-regulation provisions that have to be recognised as a minimum standard by the supervisory authority. As resolved on 14 December 2012, the Federal Council wishes to refrain from introducing a widespread self-declaration obligation.

If the risk-based assessment reveals suspicions of a lack of tax compliance, financial intermediaries will have to refuse to accept assets in the future. If in the case of an existing client a change in behaviour, for example, prompts justified suspicions that the client's assets are not tax-compliant, the financial intermediary will have to ask the client to provide proof of tax compliance within a reasonable timeframe given the circumstances. If the client is unable to supply proof, the business relationship is ultimately to be terminated.

The FATF recommendations and the enhanced due diligence requirements within the scope of the financial market strategy are to be implemented by two independent bills, on which the Federal Council launched consultations today.