The Swiss Federal Banking Commission (SFBC) has issued an Ordinance concerning the Prevention of Money Laundering (December 18 2002). The Ordinance introduces stricter due diligence obligations in the case of higher risk business relationships. But in all other business relationships the standard identification procedure still prevails as contained in the revised Due Diligence Agreement (CDB 03) published by the Swiss Bankers Association on January 17 2003 (see www.swissbanking.org). The content of the Ordinance is similar to its draft version, released last summer and already summarized in IFLR (November 2002, Vol. XXI 11, p63). This report pinpoints three of the most significant changes between the draft and the final version and briefly presents the implementation schedule financial intermediaries must comply with.
First, the Ordinance no longer includes, in its definition of the term "politically exposed persons" (PEPs), anyone that no longer holds the prominent public position that has triggered their PEP status. The draft meant for PEPs a lifetime status as higher risk clients, irrespective of any change in their professional occupation or their ties with any other PEPs, and was therefore deemed excessively rigid.
Furthermore, the draft version explicitly mentioned "parliamentarians" as PEPs and seemed, to that extent, to widen the scope of the definition agreed on in the "Supervisors' PEP working paper 2001" of November 29 2001 (see www.ebk.ch). However, the Ordinance does not include parliamentarians any more. Do they belong to the listed category of "party officials on the national level" or could this mean that not all parliamentarians hold a prominent public position? (article 1, let. a).
Secondly, according to the Ordinance, a financial intermediary is not bound to carry out the additional investigations in a given case. A third party may be appointed, provided that the intermediary remains in a position to verify that the additional investigations are carried out with due diligence and that, subsequently, the results are reviewed with a view to their plausibility. Sub-delegation is not permitted (article 19).
Thirdly, external auditors of the financial intermediary must give in their report, opinions on the compliance, by the financial intermediary, with the provisions of the Ordinance (article 31).
The Ordinance comes into force on July 1 2003 and replaces the 1998 Money Laundering Guidelines of the SFBC. Before October 1 2003, financial intermediaries need to submit an action plan and timetable to their external auditors for review and then report to the SFBC. Furthermore, overseas branch offices, subsidiaries of financial intermediaries as well as relationships with correspondent banks must satisfy the basic principles of the Ordinance no later than one year after its entry into force (that is, before July 1 2004). Finally, financial intermediaries must meet all the requirements related to cross-border wire transfers (article 15), organizational measures (article 7-13) and additional investigations (article 17-22) within the same one-year time period.