In 1998, the Federal Banking Commission (FBC) issued a circular to all banks setting out guidelines relating to money laundering. The FBC now plans to issue more formal and stringent legislation in the form of an Ordinance on the subject. A draft of the Ordinance prepared by a committee was sent for comment to various business organizations of the banking trade at the beginning of July.
The main features of the draft and the relevant changes can be summarized briefly as follows:
- All banks and other financial intermediaries are required to classify their clients into categories with respect to legal and reputation risks. Clients with higher risks, such as politically exposed persons (PEPs) must be specially identified. Background information given by the client or by his or her representatives can no longer be relied on but must be checked against available public sources.
- The draft also carries out the principles set out in the International Convention for the Suppression of the Financing of Terrorism of December 9 1999 which has not yet been ratified by the Swiss parliament.
- The monitoring of clients and transactions with special reputation or legal risks must be done on a consolidated worldwide basis, and to that effect a global compliance function must be created (group compliance officer).
- The identification and monitoring of all transactions falling into such high-risk categories must be supported by information technology systems. An exception to this obligation can only be granted to finance intermediaries with a small number of clients.
- As a rule all international payment orders must indicate the name and address of the payor.
- The decision for taking up business relationships with politically exposed persons and the supervision of relationships with high-risk persons is the responsibility of the highest management level of the bank.
This new Ordinance should become effective on July 1 2003. However, the draft is expected to undergo a number of changes before it reaches its final form because the FBC itself is proposing a number of amendments to the text of its commission.
At the same time a new Agreement on the Swiss Banks' Code of Conduct should be concluded setting out in more detail the obligations of the banks in this context replacing the old Agreement of 1998 (CDB 98).