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Mutual Evaluation of Switzerland - 2016

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Assessment of the measures to combat money laundering and the financing of terrorism and proliferation in Switzerland: ratings, key findings and priority actions.

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Mutual Evaluation of Switzerland - 2016

  1. 1. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 1 Anti-money laundering and counter- terrorist financing (AML/CFT) measures in Switzerland Fourth Round Mutual Evaluation Key findings, ratings and priority actions December 2016 www.fatf-gafi.org/publications/mutualevaluations/documents/mer-switzerland-2016.html
  2. 2. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 Ratings – Effectiveness (1/3) 2 Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF) Extent to which Switzerland has achieved this objective 1. ML and TF risks are understood and, where appropriate, actions co-ordinated domestically to combat ML and TF Substantial 2. International co-operation delivers appropriate information, financial intelligence, and evidence, and facilitates action against criminals and their assets Moderate 3. Supervisors appropriately supervise, monitor and regulate financial institutions and designated non-financial businesses and professions (DNFBPs) for compliance with AML/CFT requirements commensurate with their risks. Moderate 4. Financial institutions and DNFBPs adequately apply AML/CFT preventive measures commensurate with their risks, and report suspicious transactions. Moderate
  3. 3. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 3 Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF) Extent to which Switzerland has achieved this objective 5. Legal persons and arrangements are prevented from misuse for money laundering or terrorist financing, and information on their beneficial ownership is available to competent authorities without impediments Moderate 6. Financial intelligence and all other relevant information are appropriately used by competent authorities for money laundering and terrorist financing investigations. Substantial 7. Money laundering offences and activities are investigated and offenders are prosecuted and subject to effective, proportionate and dissuasive sanctions Substantial 8. Proceeds and instrumentalities of crime are confiscated. Substantial Ratings – Effectiveness (2/3)
  4. 4. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 4 Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF) Extent to which Switzerland has achieved this objective 9. Terrorist financing offences and activities are investigated and persons who finance terrorism are prosecuted and subject to effective, proportionate and dissuasive sanctions. Substantial 10. Terrorists, terrorist organisations and terrorist financiers are prevented from raising, moving and using funds, and from abusing the non-profit sector. Substantial 11. Persons and entities involved in the proliferation of weapons of mass destruction are prevented from raising, moving and using funds, consistent with the relevant United Nations Security Council Resolutions. Substantial Ratings – Effectiveness (3/3)
  5. 5. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 5 Ratings – Effectiveness 7-Dec-2016 0 7 4 0 High Substantial Moderate Low
  6. 6. 7-Dec-16 6 Ratings – technical compliance (1/5) AML/CFT POLICIES AND COORDINATION 1. Assessing risks & applying a risk-based approach LarLarLarLar Largely compliant 2. National cooperation and coordination LarLarLarLar Largely compliant MONEY LAUNDERING AND CONFISCATION 3. Money laundering offence LarLarLarLar Largely compliant 4. Confiscation and provisional measures LarLarLarLar Largely compliant TERRORIST FINANCING AND FINANCING OF PROLIFERATION 5. Terrorist financing offence LarLarLarLar Largely compliant 6. Targeted financial sanctions related to terrorism & terrorist financing LarLarLarLar Largely compliant 7. Targeted financial sanctions related to proliferation ComCo Co Co Compliant 8. Non-profit organisations ParPa Pa Pa Partially compliant
  7. 7. 7-Dec-16 7 Ratings – technical compliance (2/5) PREVENTIVE MEASURES 9. Financial institution secrecy laws Co Co ComCom Compliant Customer due diligence and record keeping 10. Customer due diligence Pa Pa ParPar Partially compliant 11. Record keeping Co Co ComCom Compliant Additional measures for specific customers and activities 12. Politically exposed persons LarLarLarLar Largely compliant 13. Correspondent banking LarLarLarLar Largely compliant 14. Money or value transfer services Co Co ComCom Compliant 15. New technologies LarLarLarLar Largely compliant 16. Wire transfers Pa Pa ParPar Partially compliant
  8. 8. 7-Dec-16 8 Ratings – technical compliance (3/5) PREVENTIVE MEASURES (continued) Reliance, Controls and Financial Groups 17. Reliance on third parties LarLarLarLar Largely compliant 18. Internal controls and foreign branches and subsidiaries LarLarLarLar Largely compliant 19. Higher-risk countries Pa Pa Pa Par Partially compliant Reporting of suspicious transactions 20. Reporting of suspicious transactions LarLarLarLar Largely compliant 21. Tipping-off and confidentiality LarLarLarLar Largely compliant Designated non-financial Businesses and Professions (DNFBPs) 22. DNFBPs: Customer due diligence Pa Pa Pa Par Partially compliant 23. DNFBPs: Other measures Pa Pa Pa Par Partially compliant TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS 24. Transparency and beneficial ownership of legal persons LarLarLarLar Largely compliant 25. Transparency and beneficial ownership of legal arrangements LarLarLarLar Largely compliant
  9. 9. 7-Dec-16 9 Ratings – technical compliance (4/5) POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND OTHER INSTITUTIONAL MEASURES Regulation and Supervision 26. Regulation and supervision of financial institutions LarLarLarLar Largely compliant 27. Powers of supervisors LarLarLarLar Largely compliant 28. Regulation and supervision of DNFBPs LarLarLarLar Largely compliant Operational and Law Enforcement 29. Financial intelligence units Co Co Co Com Compliant 30. Responsibilities of law enforcement and investigative authorities Co Co Co Com Compliant 31. Powers of law enforcement and investigative authorities LarLarLarLar Largely compliant 32. Cash couriers LarLarLarLar Largely compliant
  10. 10. 7-Dec-16 10 Ratings – technical compliance (5/5) POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND OTHER INSTITUTIONAL MEASURES (continued) General Requirements 33. Statistics Pa Pa ParPar Partially compliant 34. Guidance and feedback LarLarLarLar Largely compliant Sanctions 35. Sanctions Pa Pa ParPar Partially compliant INTERNATIONAL COOPERATION 36. International instruments LarLarLarLar Largely compliant 37. Mutual legal assistance LarLarLarLar Largely compliant 38. Mutual legal assistance: freezing and confiscation LarLarLarLar Largely compliant 39. Extradition LarLarLarLar Largely compliant 40. Other forms of international cooperation Pa Pa ParPar Partially compliant
  11. 11. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 11 Ratings – technical compliance 7-Dec-2016 6 25 9 0 Compliant Largely compliant Partially compliant Non compliant
  12. 12. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 Key findings  Swiss authorities generally have a good understanding of the risks of ML/TF, which was furthered by the first National Risk Assessment (NRA) published in June 2015. In 2013, Switzerland set up an AML/CFT co-ordination and cooperation body to bring AML/CFT strategy and policies in line with changes in identified risks.  The Swiss financial system is exposed to a high risk of ML associated with the laundering of assets derived from offences that are mostly committed abroad. Banking, in particular private banking, is the sector most exposed to these risks. A number of important aspects specific to Switzerland, such as the use of cash or legal persons in general, including domiciliary companies, have not yet been analysed in detail with regard to the ML/TF risks to be included in the NRA. The risk of TF is more limited, but outreach is required to raise the awareness of non-profit organisations (NPOs). 127-Dec-2016
  13. 13. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 Key findings 7-Dec-2016 13  The Swiss AML/CFT framework has been developed using a risk- based approach and reflects the high risk level associated with the banking sector. In general, Swiss authorities take identified risk into account in their objectives and activities.  In general, financial institutions and designated non-financial businesses and professions (DNFBPs) understand the ML/FT risks they face and their associated obligations. Overall, they apply measures commensurate with their risks, although classification of customers into inappropriate risk categories can undermine this approach. The implementation of due diligence measures with existing customers is not always satisfactory, particularly for longstanding customers of banks and asset managers classified as low risk at the beginning of the relationship, and where the source of funds was not always identified in line with current requirements.
  14. 14. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 Key findings  The number of suspicious transaction reports (STR) has been steadily increasing for several years following awareness-raising campaigns for reporting entities led by the Swiss authorities. However, the number remains insufficient, and most of them are produced in response to external information sources, usually when there is a grounded suspicion of ML/TF. FINMA needs to increase supervision and sanctions regarding compliance with the reporting requirement. 147-Dec-2016
  15. 15. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 Key findings 157-Dec-2016  The approach to AML/CFT supervision in Switzerland generally encourages a continuous monitoring of financial institutions and DNFBPs. The authority of the Swiss Financial Market Supervisory Authority (FINMA) is recognised by self-regulatory bodies (OARs) and the institutions/professionals it supervises directly. While this means that the remedial measures imposed by FINMA are generally complied with, its sanction policy for serious violations of AML/CFT obligations remains inadequate, as does that of the OARs. Furthermore, OARs are inconsistent in the way in which they take risk into account in their supervision activities. Work should continue in order to align the supervision practices of FINMA and OARs, particularly for the highest risk sectors such as fiduciaries. The general quality of AML/CFT audits still needs to be improved, and should include more detailed controls by FINMA
  16. 16. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 Key findings  The Swiss authorities demonstrate a clear commitment to prosecute ML. Large-scale complex investigations are carried out, particularly using the high-quality intelligence provided by MROS on both a federal and cantonal level. Convictions have been obtained for all types of ML, especially in cases involving predicate offences committed abroad, which reflects the international exposure of Switzerland as a major financial centre. Assets have also been confiscated in cases where no conviction could be obtained. Investigations, prosecutions and confiscations are generally consistent with the risks identified. However, progress still needs to be made in imposing sanctions that are proportionate and sufficiently dissuasive. 167-Dec-2016
  17. 17. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016  The mutual legal assistance provided by Switzerland is generally satisfactory and has involved the freezing and restitution of large sums linked with international corruption, but shortcomings associated with maintaining the confidentiality of requests have been observed. MROS and FINMA work jointly with their foreign counterparts at a level that corresponds to the international nature of the Swiss financial centre. However, there are some limits to this co-operation, which affect information sharing by MROS 7-Dec-2016 17 Key findings
  18. 18. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 Priority Actions for Switzerland to strengthen its AML/CFT System 187-Dec-2016  Supervisors should strengthen their controls of compliance with reporting requirements, with sanctions for institutions in violation.  Supervisors should align their approaches to risks and control procedures for high-risk institutions supervised by FINMA or OARs, such as fiduciaries.  Supervisors should ensure they issue proportionate and effective sanctions for serious violations of supervision law by financial intermediaries through binding measures other than findings decisions or corrective measures
  19. 19. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 Priority Actions for Switzerland to strengthen its AML/CFT System  The recent initiative to collect statistics should be continued in order to measure the results of the work of law enforcement and investigation authorities and adjust prosecution measures if necessary.  Switzerland should reinforce its analysis of ML/TF risks associated with the use of cash and legal persons. On the basis of this analysis, authorities should produce and implement suitable actions for managing and controlling risks. 197-Dec-2016
  20. 20. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 Priority Actions for Switzerland to strengthen its AML/CFT System  In order to strengthen international cooperation in AML/CFT, the Swiss authorities should take the measures required to ensure the confidentiality of mutual assistance requests and remove the limits on the scope of information that MROS can exchange.  The Swiss authorities should ensure that sanctions for ML and TF offences are sufficiently dissuasive.

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