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General climate and recent developments

State of legal development

In general terms, how developed are the laws on money laundering, terrorism financing and fraud in your jurisdiction?

In 1977 Switzerland was one of the first countries to introduce measures against money laundering. It now has well-developed, robust regulations in place to combat money laundering and terrorism financing. Further, Switzerland is a member of the Financial Action Task Force (FATF) – an international body of experts which develops global anti-money laundering standards. As such, Switzerland has implemented these standards and is subject to regular peer review.

In February 2012 the FATF revised its 40 recommendations, which affected the Swiss anti-money laundering regime. Therefore, in December 2014 the Swiss legislature adopted a law to implement the revised FATF recommendations, which entered into force on January 1 2016.

In December 2016 the FATF published its fourth peer review on Switzerland (the Mutual Evaluation Report, accessible here). This review confirmed that Switzerland's anti-money laundering regulations, which implemented 31 of the 40 revised recommendations, comply or largely comply with the revised recommendations. However, the FATF also criticised certain shortcomings, such as:

  • the lack of subordination to the anti-money laundering regulations by lawyers, notaries and certain fiduciaries with regard to non-financial activities (eg, the establishment of companies and trusts); and
  • the low number of suspicious activity reports.

Recent developments

Have there been any notable recent developments in relation to anti-money laundering, terrorism financing or fraud law and enforcement, including any regulatory changes, case law and convictions?

On December 12 2014 Parliament adopted the Federal Act for Implementing the Revised Recommendations of the FATF, introducing new or revised provisions regarding anti-money laundering and criminal and corporate law. This revision was a consequence of the revised FATF recommendations of February 2012. Parliament subsequently revised the Federal Act on Combating Money Laundering and Terrorist Financing, also known as the Anti-money Laundering Act, in order to implement the revised FATF recommendations. Further, the Financial Market Supervisory Authority (FINMA) adjusted its Anti-money Laundering Ordinance in order to take into account the revised FATF recommendations. FINMA stated that its revised ordinance, which entered into force on January 1 2016, "includes insights gained from supervisory practice and recent market developments".

The revised anti-money laundering regulations aim to:

  • enhance transparency around the ownership of legal entities (ie, beneficial owners and controlling persons);
  • enhance the definition of ‘politically exposed persons’ (PEPs); and
  • extend the scope of predicate offences for money laundering to include qualified tax offences.

To meet these aims, the revised regulations, among other things:

  • requested the establishment of the identity of a controlling person for operating legal entities, partnerships, foundations and trusts;
  • requested the establishment of a natural person as a beneficial owner;
  • introduced a requirement for stock corporations that have issued bearer shares to maintain a shareholders’ register;
  • introduced qualified tax offences as predicate offences for money laundering;
  • extended the definition of a ‘PEP’ to include domestic PEPs and PEPs of intergovernmental organisations; and
  • introduced additional due diligence duties for merchants in case of cash payments in excess of Sfr100,000.

Switzerland's anti-money laundering regulations are continuously evolving. As a consequence of the aforementioned 2016 peer review, in Spring 2018 Parliament will consider:

  • the Mutual Evaluation Report’s findings;  
  • the implementation of the report’s recommendations; and
  • overall improvements to the way in which FATF standards are conformed with.

In addition, FINMA’s Anti-money Laundering Ordinance is once again under review. The revised ordinance is scheduled to enter into force in 2019.

Legal and enforcement framework

Domestic legislation

What primary and secondary legislation applies to money laundering, terrorism financing and fraud in your jurisdiction?

The primary pieces of legislation that apply to money laundering, terrorism financing and fraud in Switzerland are:

  • the Penal Code (Articles 146, 260quinquies and 305bis);
  • the Anti-money Laundering Act; and
  • the Financial Market Supervisory Authority (FINMA) Anti-money Laundering Ordinance 2016.

The secondary pieces of legislation that apply to money laundering, terrorism financing and fraud in Switzerland are:

  • FINMA Circular 2011/1 (Financial Intermediation under the Anti-money Laundering Act, soft law, 2011);  
  • the Agreement on the Swiss Banks' Code of Conduct with regard to the Exercise of Due Diligence (CDB 16, soft law, 2016); and
  • the 11 Self-Regulatory Organisations' Regulation (soft law).

To whom does the legislation apply? May both individuals and organisations be held liable under the legislation? Does the legislation have extraterritorial effect?

The above legislation applies to financial intermediaries – including banks, fund managers, investment companies and securities dealers – as well as natural persons and legal entities active in the para-banking sector that:

  • “deal in goods commercially and in doing so accept cash (dealers)" (Article 2, Paragraph 1(b) of the Anti-money Laundering Act); and
  • "on a professional basis accept or hold deposit assets belonging to others or… assist in the investment or transfer of such assets" (Article 2, Paragraph 3 of the Anti-money Laundering Act).

Both individuals and legal entities are subject to the legislation. Under certain circumstances, limited extraterritorial effects apply. Further, under certain conditions, merchants accepting cash in excess of Sfr100,000 may be subject to certain obligations under the applicable acts.

International agreements

Is your jurisdiction a party to any international cooperation agreements to combat money laundering, terrorism financing and fraud?

On July 1 2016 Switzerland adopted its Ordinance on the Money Laundering Reporting Office (ie, the MROS, Switzerland's equivalent of the Financial Intelligence Unit). The ordinance includes regulations on the national and international exchange of anti-money laundering-related information.

Enforcement authorities

Which government authorities enforce the law on anti-money laundering, terrorism financing and fraud, and what is the extent of their powers?

The anti-money laundering regulations are enforced by the federal and cantonal prosecutors and by FINMA as part of its prudential supervision.

Statute of limitations

What is the limitation period for bringing actions in relation to money laundering, terrorism financing and fraud offences?

Limitation periods for money laundering, terrorism financing and fraud offences differ from between seven and 15 years.

Offences

Legal definition

How are ‘money laundering’, ‘terrorism financing’ and ‘fraud’ legally defined in your jurisdiction?

Money laundering

Under Article 301bis, Paragraphs 1 and 1bis of the Penal Code:

"1. Any person who carries out an act that is aimed at frustrating the identification of the origin, the tracing or the forfeiture of assets which he knows or must assume originate from a felony or aggravated tax misdemeanour is liable to a custodial sentence not exceeding three years or to a monetary penalty.

1bis. An aggravated tax misdemeanour is any of the offences set out in Article 186 of the Federal Act of 14 December 1993 on Direct Federal Taxation and Article 59 paragraph 1 clause one of the Federal Act of 14 December 1994 on the Harmonisation of Direct Federal Taxation at Cantonal and Communal Levels, if the tax evaded in any tax period exceeds 300,000 francs."

Terrorism financing

Under Article 260quinquies, Paragraph 1 of the Penal Code:

"Any person who collects or provides funds with a view to financing a violent crime that is intended to intimidate the public or to coerce a state or international organisation into carrying out or not carrying out an act is liable to a custodial sentence not exceeding five years or to a monetary penalty."

Fraud

Under Article 146, Paragraph 1 of the Penal Code:

"Any person who with a view to securing an unlawful gain for himself or another wilfully induces an erroneous belief in another person by false pretences or concealment of the truth, or wilfully reinforces an erroneous belief, and thus causes that person to act to the prejudice of his or another's financial interests, is liable to a custodial sentence not exceeding five years or to a monetary penalty."

Principal and secondary offences

What are the principal and secondary offences in relation to money laundering, terrorism financing and fraud?

See legal definitions above. In addition, a lack of due care in financial transactions is also an offence under Article 305ter of the Penal Code, which states that:

Anyone who professionally accepts, retains, invests or assists in the transfer of third-party assets and fails to determine the identity of the beneficial owner with due diligence in the circumstances will be punished with imprisonment for up to one year or a fine."

Predicate offences

How are predicate offences defined?

Generally speaking, all offences for which a custodial sentence of three or more years is imposed (ie, felonies pursuant to Article 10, Paragraph 2 of the Penal Code) may qualify as a predicate offence. Although a number of these offences are set out in the Penal Code, various other laws also include potential predicate offences for money laundering, including:

  • the Federal Act on Narcotics and Psychotropic Substances;
  • the Federal Act on Weapons, Weapon Accessories and Ammunition;
  • the Federal Act on Direct Federal Taxation; and
  • the Federal Act on the Harmonisation of Direct Federal Taxation at Cantonal and Communal Levels.

Even unlikely offences such as copyright and trademark infringement may constitute a predicate offence for money laundering in certain circumstances (eg, if they are committed for commercial reasons).

De minimis rules

What de minimis rules apply to money laundering, terrorism financing and fraud offences?

No de minimis rules apply to money laundering, terrorism financing or fraud offences. However, a financial intermediary’s obligations may depend on the amount involved in a transaction. For example, in case of cash transactions, the customer need be identified only if the amount exceeded Sfr25,000 (it is proposed that this threshold be reduced to Sfr15,000).

Penalties and plea agreements

Penalties

What penalties may be issued for money laundering, terrorism financing and fraud offences?

Money laundering

Under Article 301bis, Paragraphs 1 and 1bis of the Penal Code:

"1. Any person who carries out an act that is aimed at frustrating the identification of the origin, the tracing or the forfeiture of assets which he knows or must assume originate from a felony or aggravated tax misdemeanour is liable to a custodial sentence not exceeding three years or to a monetary penalty.

1bis. An aggravated tax misdemeanour is any of the offences set out in Article 186 of the Federal Act of 14 December 1993 on Direct Federal Taxation and Article 59 paragraph 1 clause one of the Federal Act of 14 December 1994 on the Harmonisation of Direct Federal Taxation at Cantonal and Communal Levels, if the tax evaded in any tax period exceeds 300,000 francs."

Terrorism financing

Under Article 260quinquies, Paragraph 1 of the Penal Code:

"Any person who collects or provides funds with a view to financing a violent crime that is intended to intimidate the public or to coerce a state or international organisation into carrying out or not carrying out an act is liable to a custodial sentence not exceeding five years or to a monetary penalty."

Fraud

Under Article 146, Paragraph 1 of the Penal Code:

"Any person who with a view to securing an unlawful gain for himself or another wilfully induces an erroneous belief in another person by false pretences or concealment of the truth, or wilfully reinforces an erroneous belief, and thus causes that person to act to the prejudice of his or another's financial interests, is liable to a custodial sentence not exceeding five years or to a monetary penalty."

Plea agreements

Are plea agreements available? If so, how often are they used and what rules, standards and procedures apply?

Under Article 358ss of the Code of Criminal Procedure, the accused may apply to the prosecutor for an abbreviated proceeding if the relevant facts are admitted. Further, the accused must, in principle, recognise any civil claims raised by injured parties. If the prosecutor agrees, he or she will submit an indictment to the court. All parties (including injured parties) have the right to oppose an indictment. To date, this new instrument has seldom been used.

Defences

Available defences

What defences are available in your jurisdiction to parties accused of money laundering, terrorism financing or fraud?

Parties accused of an offence may defend themselves in court before the regional, cantonal and federal criminal law instances. They may raise any defence, including absence of fault.

Record keeping, disclosure and compliance

Record-keeping and disclosure requirements

What record-keeping and disclosure requirements apply to companies and relevant individuals under the anti-money laundering, terrorism financing and fraud legislation?

Financial intermediaries subject to the anti-money laundering regulations must retain numerous forms and documents evidencing that they have observed and continue to observe the documentation requirements imposed on them under the regulations. Such documents include:

  • Form A (beneficial ownership);
  • Form T (trusts);
  • Form K (controlling persons);
  • Form S (foundations);
  • information on the financial intermediary’s client history; and
  • information on specific transactions or businesses.

In case of an investigation by the Financial Market Supervisory Authority or federal or cantonal prosecutors, all relevant documentation must be disclosed to the authorities. As a rule, relevant documentation must be stored for 10 business years.

Compliance

What internal compliance measures are required and/or advised for companies in relation to the anti-money laundering, terrorism financing and fraud legislation?

The establishment of an internal compliance department is highly recommended for prudentially supervised financial intermediaries and required by law under certain circumstances. Companies are well advised to establish internal:

  • anti-money laundering guidelines;
  • whistleblowing guidelines and hotlines;
  • fraud prevention directives; and
  • other similar instruments.

The requirement for such internal documentation depends on the specific industry in which a financial intermediary is active. Any such documentation must be tailor-made on a case-by-case basis.

What customer and business partner due diligence is required and/or advised for companies in relation to the anti-money laundering, terrorism financing and fraud legislation?

A number of due diligence requirements are set out in Switzerland's anti-money laundering legislation, including:

  • the Anti-money Laundering Act;
  • the Financial Market Supervisory Authority (FINMA) Anti-money Laundering Ordinance 2016;
  • the Agreement on the Swiss Banks' Code of Conduct with regard to the Exercise of Due Diligence 2016; and
  • the 11 Self-Regulatory Organisations' Regulation.

A financial intermediary subject to this legislation must:

  • determine its contracting party;
  • establish the beneficial ownership in the assets involved;
  • establish the controlling persons involved (ie, persons holding 25% or more of the shares in the company); and
  • adequately document such information in its records (eg, through the aforementioned forms or through excerpts from official public resources, such as commercial registries).

Further, financial intermediaries are advised to document any non-standard incidents that occur in the context of their business relationships.

Private enforcement

Private actions

Can private actions be brought in your jurisdiction for damages arising from money laundering, terrorism financing or fraud? If so, who may file such actions and what filing procedures apply?

As a rule, a private action may be filed by a damaged party as a co-claimant in criminal proceedings or by way of a civil law action against the alleged offending party. Although it is common for co-claimants to bring claims in criminal proceedings, the courts usually refer such claims to civil proceedings.

How are damages calculated?

The calculation of damages is complex and must be assessed on a case-by-case basis. The maximum amount of damages awarded is the actual damage incurred (including loss of future gains, if proven). The concept of punitive damages is not provided for in Swiss legislation.

What other remedies may be awarded to successful claimants?

Not applicable.