30 August 2023, the Swiss Federal Council launched a consultation procedure on a bill to strengthen the anti-money laundering framework. The aim is to reinforce the integrity and competitiveness of Switzerland as a financial and business location with a federal register of beneficial owners, enhanced due diligence for high-risk legal and advisory activities, as well as other provisions.
The main proposal is for the creation of a central federal register on which Swiss legal entities and certain foreign entities would have to register information on their ultimate beneficial owners (UBOs). This register would replace the current rules governing UBO identification within Swiss companies and would be in line with the international standards of the Financial Action Task Force (FATF) on combating money laundering and terrorist financing.
The new regime would apply primarily to legal entities under Swiss law – AG, GmbH, SICAV/SICAF, cooperatives, foundations and associations entered in the commercial register. It would also apply to non-Swiss legal entities that have a branch in Switzerland, or have their central administration in Switzerland, or own real estate in Switzerland. It would not apply to companies listed on a stock exchange and their subsidiaries.
Under the proposal, the definition of UBO would be aligned with the anti-money laundering definition, which covers any natural person holding (directly or indirectly) at least 25% of the capital or the voting rights of the entity, or who exercises control over the entity through other means. A UBO can comprise several persons acting together.
For entities, required UBO information would include the corporate name, the registered address, and the Federal Company Identification Number. For individuals, it would include name, date of birth, nationality, address, as well as the Federal Social Insurance number. Nominee directors and nominee shareholders would be required to disclose the nominee relationship to the entity and the identity of the person on whose behalf they are acting.
The proposal contains specific rules for trusts. UBOs would be deemed to be the settlor, the trustee, the protector, the beneficiary and any other person exercising control over the trust. The identification duties would fall upon the trustee. The information would however not be included in the UBO Register.
A transitional period would be provided for existing legal entities to report the identity of their UBOs, as well as the type and extent of the control exercised. New legal entities would be required to report UBO information within one month of registration, while changes in the registered UBO information would also be subject to a one-month reporting deadline.
This non-public register will be managed by the Federal Department of Justice and Police (FDJP), to make use of the existing infrastructure and know-how of the authorities running the commercial register. To ensure the quality of the register, an audit unit within the Federal Department of Finance (FDF) will carry out checks and, where necessary, issue penalties.
Under the proposals, anti-money laundering due diligence rules will also be applied to certain consultancy activities (especially legal advice) that carry an elevated risk of money laundering. This move is in response to the proposal already discussed by Parliament in 2019. The structuring of companies or transactions with real estate are considered to be particularly risky. The position of the legal profession and lawyers' and notaries' duty of professional confidentiality are respected.
A series of additional measures are also proposed to strengthen the anti-money laundering framework. These include measures to prevent sanctions under embargo legislation from being breached or circumvented. The threshold for cash payments in precious metals trading will be lowered from CHF100,000 (c. USD112,000) to CHF15,000. Cash payments above this limit will be subject to certain due diligence rules. All cash payments for real estate business will be subject to anti-money laundering due diligence rules, irrespective of the amount.
The consultation on the bill will last until 29 November and the Federal Council will submit the dispatch to Parliament in 2024.
Originally published 30 October 2023
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