The Swiss Bankers Association's Due Diligence Agreement forms part of the guidelines for self-regulation drafted by the Swiss banking industry. It has been in existence since 1977 and is revised regularly.
The latest version of the agreement was issued on January 17 2003 and enters into force on July 1 2003. It provides for stricter 'know-your-customer' rules, such as requesting and recording more personal data about customers. Under the new Swiss Federal Banking Commission Money Laundering Ordinance, provisions on the verification of the identities of contracting parties and the identification of beneficial owners apply to all financial intermediaries, including banks and securities dealers.
The key changes to the Due Diligence Agreement are as follows:
- The fight against terrorist funding is now expressly mentioned as one of the purposes of the agreement.
- Banks are prohibited from using establishments outside Switzerland to circumvent the agreement's provisions.
- The basic know-your-customer obligations with regards to verifying the identity of the contracting party and identifying the beneficial owner of funds are set out. Duties of further clarification in the case of higher-risk business relationships are governed by the Swiss Money Laundering Ordinance.
- Banks are no longer entitled to commence a business relationship unless the party with whom they are transacting presents an official identity document. The fact that an employee of the bank personally knows the contracting party is no longer sufficient for know-your-customer purposes.
- The bank must request certified copies of identity documents where business relationships are commenced by correspondence or through the Internet.
- Where the contracting party is a foreign legal person, its identity must be verified on the basis of a certified extract from a companies register or an equivalent document, or on the basis of information contained on an official website providing such corporate information.
- Where a business relationship is commenced with a legal person or partnership which is not registered in the Swiss Commercial Register, the bank must also verify the identity and keep a copy of the identity documents of the people who established the business relationship if these people are also authorized signatories on the bank account.
- As an exception, where a bank is not in a position to obtain the documents requested by the Due Diligence Agreement for the purpose of verifying the identity of the contracting party, other documents can be used or information can be obtained from official bodies, as long as this is considered appropriate in light of the principles laid down in the Due Diligence Agreement.
- A bank can delegate responsibility for verifying the identity of a contracting party on the basis of a written agreement. In such cases the bank must properly instruct the delegated party and must be in a position to ensure that verification is properly executed. The original documents used in the verification process must be remitted to the bank.
- In principle, all documents requested in order to verify the identity of the contracting party must be obtained in the appropriate form before a bank account can be used. In exceptional cases, a bank may take up to 30 days to obtain these documents from a customer if the documents are not available at the time the account is opened and if the bank is in a position to ensure that the missing documents will be submitted within this timeframe. No withdrawals may be made until the documents have been received, and access to the account will be blocked at the end of the 30-day period if the documents have not been submitted by then.
- Foreign banks which are not subject to appropriate money-laundering supervision (ie, which are not subject to the supervision of a Financial Action Task Force member state), and which operate numbered sub-accounts for customers which are not specified, are obliged to inform any Swiss banks with which they transact of the beneficial owners of such numbered accounts.
- Special rules apply to charities, which are now bound by the beneficial owner identification requirements.
This new version of the Due Diligence Agreement will enter into force on July 1 2003, at the same time as the new Money Laundering Ordinance. With the exception of the points listed above, the Due Diligence Agreement has not been substantially changed and continues to prohibit the provision of active assistance in capital flight and tax evasion. Violations of the agreement will continue to be investigated by special investigators appointed by the board of directors of the Swiss Bankers Association and an independent supervisory board.
For further information on this topic please contact Emmanuel Genequand or Guy-Philippe Rubeli at Pestalozzi Lachenal Patry by telephone (+41 22 80 94 500) or by fax (+41 22 80 94 501) or by email ([email protected] or [email protected]).