The large number of statutory provisions concerning the combating of money laundering and terrorism finance at the national and international level means that it is first necessary to provide an overview of the most important national statutory sources (Swiss legislation).
Criminal Code (“StGB”)
The Swiss Criminal Code (Strafgesetzbuch – “StGB”) represents the basis upon which organised crime and money laundering as well as terrorism finance are combated at the level of criminal law. It defines offences which make it possible to punish involvement in criminal organisations (Art. 260ter StGB), the financing of terrorism (Art. 260quinquies) as well as activities which are of relevance to money laundering (Art. 305bis StGB) and due diligence shortcomings in conjunction with financial transactions (Art. 305ter StGB).
StGB statutory provisions
Art. 260ter Criminal organisation
1. Whosoever takes part in an organisation which keeps its structure and composition secret and pursues the purpose of committing violent crimes or enriching itself with assets of a criminal origin, or whosoever supports the criminal activities of an organisation of this nature, shall be punished with a term of imprisonment of up to five years or a fine.
2. The judge may impose a milder sentence (Art. 48a) if the offender endeavours to prevent the continued criminal activity of the organisation.
3. Whosoever commits the offence abroad may also be punished if the organisation exercises or plans to exercise its criminal activities wholly or in part in Switzerland. Article 3 Para. 2 is applicable.
Art. 260quinquies Terrorism finance
1 Whosoever, for the purpose of financing a violent crime, intimidates the population or coerces a states or an international organisation to commit an act or to refrain from committing an act, collects assets or makes assets available, shall be punished with a term of imprisonment of up to five years or a fine.
2 If the offender merely tacitly accepts the possibility of terrorism finance, then he is not deemed to have committed an offence under this provision.
3 The act shall not be deemed to constitute the financing of a terrorist crime if it aims to establish or restore democratic and constitutional conditions or the exercise or safeguarding of human rights.
4 Para. 1 is not applicable if the finance supports actions which are not at variance with human rights rules applicable in armed conflicts.
Art. 305bis Money laundering
1. Whosoever commits an act which is designed to thwart the identification of the origin, the tracing or the confiscation of assets which he knows or should know are the proceeds of crime, shall be punished with a term of imprisonment of up to three years or a fine.
2. In serious cases the punishment shall be a term of imprisonment of up to five years or a fine. A fine of up to 500 daily rates shall be imposed together with the term of imprisonment. A serious case shall in particular be deemed to have exist if the offender:
a. acts as a member of a criminal organisation;
b. acts as a member of a gang which has come together for the purpose of long-term money laundering;
c. generates substantial sales or substantial profits through money laundering pursued on a commercial basis.
3. The offender shall also be punished if the principal offence was committed abroad, and if this moreover constitutes a criminal act at the location where it was committed.
Art. 305ter Due diligence shortcomings in conjunction with financial transactions and reporting obligations
1 Whosoever accepts, holds for safekeeping, invests or helps to transfer third-party assets on a professional basis and fails to exercise the due diligence required under the circumstances to ascertain the identity of the beneficial owner, shall be punished with a term of imprisonment of up to one year or with a fine.
2 The persons covered by Para. 1 are entitled to report observations to the Money Laundering Report Office Switzerland at the Federal Office of Police which suggest that assets are the proceeds of crime.
Swiss Money Laundering Act (“GwG”)
Criminal law punishes the actual criminal offence committed to obtain assets. The Federal Act on Combating Money Laundering and Terrorism Finance in the Financial Sector (official title: Bundesgesetz über die Bekämpfung der Geldwäscherei und der Terrorismusfinanzierung im Finanzsektor (Geldwäschereigesetz – “GwG”)) of 10 October 1997 sets out flanking, extended measures. These are designed to combat money laundering and terrorism finance as well as to ensure the exercise of due diligence in conjunction with financial transactions by laying down uniform standards for the financial sector (due diligence obligations), including in the non-banking sector, in order to prevent the capital/assets which are the proceeds of crime being channelled into the legitimate economic cycle.
The Swiss Money Laundering Act is a framework act, and is based upon the principle of self-regulation. Self-regulation means that the respective affected field of a financial sector is regulated by private organisations (self-regulating organisation – “SRO”). The respective organisation imposes GwG-related regulations upon its members, in accordance with the specific requirements and needs of the respective field. To this extent, the system can be expected to enjoy a high level of acceptance amongst the members subject to these regulations.
Money Laundering Ordinance FINMA
The Swiss Financial Market Supervisory Authority (“FINMA”) has exercised its regulatory powers and brought together the existing ordinances on the prevention of money laundering and terrorism finance. These derive from the predecessor organisations of the Swiss Banking Commission, the Federal Office of Private Insurance as well as the Control Authority for Combating Money Laundering. The new ordinance came into force on 1 January 2011 in the form of the Ordinance of the Swiss Financial Market Supervisory Authority concerning the Prevention of Money Laundering and Terrorism Finance (official title: “Verordnung der Eidgenössischen Finanzmarktaufsicht über die Verhinderung von Geldwäscherei und Terrorismusfinanzierung” (in short: “GwV-FINMA”) of 8 December 2010.
Specifically, the following ordinances were set aside:
- the Money Laundering Ordinance FINMA 1 (“Geldwäschereiverordnung-FINMA 1”) of 18 December 2002 in the banking, securities trading and collective investment field;
- the Money Laundering Ordinance FINMA 2 (“Geldwäschereiverordnung-FINMA 2”) of 24 October 2006 in the private insurance field;
- the Money Laundering Ordinance 3 (“Geldwäschereiverordnung-FINMA 3” of 6 November 2008 in the remaining financial sector (i.e. relating to financial intermediaries directly overseen by the FINMA).
Within the framework of a technical merger, the Money Laundering Ordinance that recently came into force (Geldwäschereiverordnung – “GwV-FINMA”) is designed to harmonise the previous separately regulated fields. In the field of self-regulation, the FINMA draws upon the provisions of the aforementioned ordinance when it:
- approves the regulations of self-regulating organisations pursuant to Art. 25 GwG, and
- recognises the regulations thereof as the minimum standard pursuant to Art. 17 GwG.
Agreement on Professional Standards for Due Diligence Obligations of Banks
Within the context of its efforts to protect the reputation of the Swiss banking sector in Switzerland and abroad, it was in 1977 that the Swiss Bankers Association (Schweizerische Bankiervereinigung – “SBVg”) first concluded an Agreement on Professional Standards for Due Diligence Obligations of Banks (Vereinbarungen über die Standesregeln zur Sorgfaltspflicht der Banken – “VSB 08”). These rules are revised every five years. Member banks and securities traders are subject to these professional standards. On the basis of the professional standards, they undertake:
- to identify their contracting parties, and in case of doubt to obtain a declaration from the contracting parties about the beneficial owners of the assets;
- not actively to facilitate capital flight;
- not actively to facilitate tax evasion and similar activities by issuing incomplete or misleading certificates.
SBVg commentary on the VSB 2008
Ordinance on the Professional Exercise of Financial Intermediation
The new Ordinance on the Professional Exercise of Financial Intermediation (Verordnung über die berufsmässige Ausübung der Finanzintermediation – “VBF”) came into force on 1 January 2010. The ordinance essentially reflects the provisions of the previous regulations, the (Verordnung der Eidgenössischen Finanzmarktaufsicht über die berufsmässige Ausübung der Finanzintermediation – in short: “VBAF-FINMA”) and the established practice of the supervisory authority. The established practice of the supervisory authority has already been recorded in a commentary. The new VBF specifies the activities that are deemed to constitute financial intermediation in the non-banking sector (Art. 2 Para. 3 GwG), and contains criteria for professional activity. In order to define these in greater detail, it also contains a negative catalogue, i.e. activities are listed that are explicitly deemed to constitute financial intermediation and which are consequently not covered by the scope of the GwG.
The small number of changes set out in the VBF slightly restrict the scope of the GwG. Stricter rules apply to money or securities transfer activities, which are highly vulnerable to money laundering. Here the threshold before these activities are deemed to be exercised on a professional basis has been dropped.
FINMA Circular 2011/1 “Financial Mediation pursuant to GwG”
The FINMA is entitled to pass execution provisions relating to the Ordinance on the Professional Exercise of Financial Intermediation (Art. 12 VBF). For this purpose it issued the Circular FINMA (“FINMA-Rundschreiben 2011/1- Finanzintermediation nach GwG”), which sets out the FINMA’s established practice in respect of activities which are governed by the Swiss Money Laundering Act. In addition, the Circular describes how the FINMA interprets the provisions of the GwG and of the VBF, in particular under which circumstances it assumes that financial intermediation is being exercised on a professional basis.
The Money Laundering Report Office Ordinance
The Money Laundering Report Office Ordinance (Verordnung über die Meldestelle für Geldwäscherei – “MGwV”) of 25 August 2004 provides a detailed description of the responsibilities of the Money Laundering Report Office (in short “MROS” – “Money Laundering Report Office Switzerland”) and the processing of reported suspicions pursuant to Art. 9 GwG. The MROS is the link between financial intermediation and the law enforcement agencies. The MROS is run by the Swiss Federal Office of Police (“BAP”) (Art. 23 GwG).