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Financiers prepare for new money laundering rules

Asset managers, money brokers, solicitors and other financial intermediaries are gearing up for April 1 when they must have completed procedures to comply to the law on money laundering which came into force two years ago.

This content was published on March 28, 2000 - 09:21

Asset managers, money brokers, solicitors and other financial intermediaries are gearing up for April 1 when they must have completed procedures to comply to the law on money laundering which came into force two years ago.

Under the Swiss Money Laundering Act of 1997, financial intermediaries are obliged to join a self-regulating body recognised by the Money Laundering Control Authority by March 31 or be subject to direct supervision by the MLCA.

The Act was a further measure to protect Switzerland's reputation as a financial centre.

Financial intermediaries are defined as natural or legal persons who professionally accept, keep or help to invest or transfer assets belonging to third parties.

The Federal Act stems from Switzerland's obligation as a member of the Financial Action Task Force, an international organisation against money laundering whose members include the main European countries, the United States, Canada, Australia, Hong Kong, Singapore, Japan, and others.

The adoption of the MLA brought Switzerland's measures against money laundering into line with the European Union and 40 recommendations made by the Task Force.

In essence, the MLA extends the due diligence obligations in financial transactions - long applicable to the banking sector - to financial intermediaries not already subject to special legislation.

In Switzerland, the intermediaries also include hoteliers, bureaux de change, the Swiss Post and the Swiss Federal Railways. They too will be subject to supervision under the MLA.

The text of the MLA defines the following due diligence requirements of intermediaries in relations with clients:
- identification of the contracting party
- establishment of the economic beneficiary
- corroboration of the identification
- a special duty of clarification
- a duty to provide documentation

Two new authorities have been created at federal level to implement, enforce and control the MLA. One is the Money Laundering Control Authority, directly answerable to the director of the Federal Finance Administration and responsible for monitoring the non-banking financial sector. The second body is the Money Laundering Reporting Office, based at the Federal Police Office, which checks the validity of incoming reports received from financial intermediaries in accordance with the newly introduced reporting obligation.

Anyone who has not joined a self-regulating body and who is working as a financial intermediary without the appropriate professional licence or who infringes the duty to report can be fined up to SFr200,000.

However, the most severe measure is for the Control Authority to order the liquidation of a financial intermediary's company, followed by its deletion from the Commercial Register.

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