Under Swiss law, money laundering, pursuant to art. 305bis of the Swiss Criminal Code (SCC), is a criminal offense that is punished with a prison sentence of more then three years. According to SCC, 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 assumes to originate from criminal dealings shall be punished by imprisonment or by a monetary penalty. In this context, money laundering is considered as a process used by lawbreakers to move, conceal and legitimize their proceeds of crime. Money laundering occurs every time any transaction takes place or any relationship is formed that involves any form of the proceeds of crime. The main purpose is to benefit securely from the proceeds of crime by making funds appear to be from a legitimate source.
The basic principles for combating money laundering in Switzerland are laid down in the Federal Act on Combating Money Laundering and Terrorist Financing (AMLA). The scope of application of the AMLA is clarified in the Anti-Money Laundering Ordnance of the Federal Council. The obligations for the prudentially supervised financial intermediaries (especially banks) and for financial intermediaries (DSFIs), subordinated by the Swiss Financial Market Supervisory Authority FINMA, are specified in the FINMA Anti-Money Laundering Ordinance (AMLO-FINMA).
As a matter of fact, article 98 of the Federal Constitution provides the constitutional basis for FINMA’s supervisory activities. FINMA’s statutory powers to supervise banks, insurances, financial market infrastructures, securities traders and collective capital investment schemes are derived from the legal basis set out in the Financial Market Supervision Act and laws for each specific sector of the respective industry. To perform its tasks, FINMA is responsible for licensing, prudential supervision, enforcement and regulation.
The most important predicate offenses in Switzerland are the following: against property (e.g. misappropriation art. 138 SCC), theft (art.139 SCC), robbery (art. 140 SCC), fraud (art. 146 SCC), criminal mismanagement (art 158 SCC), handling stolen good (art. 160 SCC), bankruptcy offenses (art. 163 et seq SCC), certain forms of drug dealing (art 19 para. 2 of the Federal Act on Narcotics and Psychotropics), bribery (art. 322ter et seq. SCC), including bribery of foreign public officials (art. 322septies SCC). Tax evasion is also qualified as criminal and predicate offenses of money laundering, punished with a prison sentence up to five years. If the qualified criminal offence of tax evasion was committed abroad and is punished there, then the perpetrator shall be prosecuted and punished in Switzerland for money laundering committed in Switzerland (art. 305bis no. 3 SCC).
Historically, the Swiss banking system was founded on the principle of secrecy, which was strictly guarded and enforced by statute. Swiss law restricted information sharing with third parties such as tax authorities and foreign governments, unless a court order has been obtained. Anonymity was obtained by means of numbered – rather than named – accounts. But in order to satisfy international money laundering requirements, now all bank accounts in Switzerland must be linked to an individual whose identity must be verified. Consequently, over recent years, there has been a relaxation in the secrecy laws in Switzerland in response to international political and regulatory pressure.
The introduction of the Foreign Account Tax Compliance Act (FATCA) which came into effect on 30 June 2014 which is an important regulatory change that has advanced habits of the Swiss banking sector. In the sense that the Act has been designed to mitigate offshore tax evasion and the US authorities have promised severe sanctions for those countries who do not comply with the Act, such as an embargo on financial trading. In order to understand why this Act is important, let us imagine a following classical mechanism used by money launderers who often establish anonymous, dummy, front or shell companies in countries where the right to secrecy is guaranteed. They then grant themselves loans out of the laundered money for future legal transactions and create loan payments. As a result, FATCA 2013 should help to mitigate the risk of this happening. Under FATCA, the US can obtain banking data about its citizens who live and/or bank in Switzerland. The Swiss authorities have agreed to share data with the US and with European countries as a consequence of the FATCA’s implementation.
In Switzerland, both natural persons and companies can be prosecuted and convicted for money laundering. In accordance with art. 102 para. 1 and 2 SCC, any criminal offense or misdemeanor committed in a company in the exercise of commercial activities is attributed to the company and to any natural person responsible for the criminal act. The notion of personal accountability has become a reality in the banking sector. Ultimately, this means that if things go wrong and certain conditions are met, the individual can face personal enforcement action. The Government also introduced a “duty of responsibility”, which means Senior Managers are required to take the steps that it is reasonable for a person in that position to take, to prevent a regulatory breach from occurring. The limitation period for prosecution is 10 years (art. 97 para. 1 lit. c SCC) for the basic offence of money laundering (art. 305bis no. 1 SCC) and 15 years (art. 97 para. 1 lit. b SCC) for the qualified offence (art. 305bis no. 2 SCC). As money laundering is an going offense, the limitation period for prosecution begins on the day on which the criminal conduct ceases (art. 98 lit. c SCC).
Consequently, it is worth mentioning , for example, the conviction of bank officers for money laundering by omission (BGE 136 IV 188). The relevant case was based on the following facts: the bribe received by tax official from the District of Rio de Janeiro were transferred to accounts of a bank headquartered in Geneva. Although the question of the admissibility of a Politically Exposed Person (PEP) engaging in secondary employment did relate to one of the officials, internal transfers to other tax officials did take place, and the accounts showed a rapid increase in capital, the evidence thus suggested that the tax officials’ balances could be of criminal origin, the bank officers neglected to inform the bank’s general management. As a result of this omission, they breached the duties of care incumbent on them and prevented the accounts from being reported to MROS and being locked.
The Money Laundering Reporting Office Switzerland (MROS) plays thus an important role in the prosecution of money laundering. It receives reports from financial intermediaries who transmit them by virtue of their reporting rights or their reporting obligations, and subsequently reviews and analyses them. It notifies the relevant prosecuting authority if it has reason to suspect that money laundering has taken place or that assets originate from a criminal and/or predicate offense or qualified tax evasion.
With increasing regulatory requirements and trends toward greater transparency, understanding the Source of Funds (SoF) and the Source of Wealth (SoW) of the Beneficial Owner (BO) has become a cornerstone in the Customer Due Diligence (CDD) process, particularly for legal entities. Collecting such information during the on-boarding process is part of the CDD sets of controls which seek to address greater money laundering, financial crime and terrorist financing risks.
Historically, the CDD finds its roots in Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) regulations driven by the 40 Recommendations of the Financial Action Task Force (FATF). In modern financial services in Switzerland, the Customer Due Diligence (CDD) is a core component of an effective Anti-Money Laundering and Financial Crime Risk Management frameworks.
Under Swiss law, money laundering, pursuant to art. 305bis of the Swiss Criminal Code (SCC), is a criminal offense that is punished with a prison