This content is from: Local Insights

Switzerland

For some years money laundering prevention measures of considerable effectiveness have applied to banks in Switzerland. These measures did not, however, cover the rest of the financial sector, and as a result the regulatory framework had large gaps. One of these was filled on April 1 1998 when the Federal Statute for the Combating of Money Laundering entered into force. It extends the standard of care exacted in the banking sector to financial intermediaries operating in the non-banking sector. If an attorney-at-law chooses to act as a financial intermediary within the meaning of the statute, he or she is fully subject to its regulatory requirements and may not, in particular, invoke professional secrecy if requested to disclose details of his or her financial activities.

A financial intermediary is a person who professionally accepts possession or custody of another's assets. This is what an attorney-at-law does when managing a client's funds, or keeping custody of a client's assets, and when helping clients to establish corporate vehicles for the management of funds. The statute requires all financial intermediaries to identify the client and to establish the identity of the material beneficiary if there is reason to doubt that the two are not the same. Failure to do so incurs penal sanctions. Furthermore, the financial intermediary must notify the authorities if he or she has reason to suspect that funds are the proceeds of a criminal offence or are under the control of a criminal organization. The attorney-at-law who acts as a financial intermediary is not exempted from this duty, because an activity in which the commercial element is prevalent is deemed to fall outside the classical ambit of advocacy, and therefore does not enjoy the protection of professional secrecy. The Swiss Federal Tribunal has recently held that this is the case where the attorney-at-law is mandated to collect funds. Exactly what constitutes 'core advocacy' is unclear, because the Swiss Federal Tribunal insists on deciding on a case-by-case basis, but the core certainly includes acting as counsel for parties before civil and criminal courts and before examining magistrates.

Accordingly, attorneys are advised to inform clients of their duties under the Statute for the Combating of Money Laundering and under the Swiss Penal Code (facing punishment for failure to observe the duty to establish the material beneficiary of assets) before entering into a client relationship which would involve financial services.

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