Switzerland generally gets good marks for its efforts to keep its financial markets clean. Together, the Swiss Penal Code, the Guidelines of the Swiss Federal Banking Commission and the Code of Conduct of the Swiss Banks constitute a solid regulatory barrier against the channelling of criminal money into the banking sector. The Financial Action Task Force of the G7 countries not long ago recognized Switzerland's efforts as a substantial contribution to the worldwide struggle against money-laundering.
This summer, Swiss legislators are preparing a further safeguard. A draft Money-Laundering Act is before parliament. The new Act aims to extend banks' due diligence duties to all other participants in the financial markets. Criminal money should henceforth find its way to insurance companies, investment funds or such 'financial intermediaries' as money-changers, lawyers or independent asset managers effectively barred.
It is generally expected that the Swiss Parliament will pass the draft Money-Laundering Act with few changes. As a consequence, financial intermediaries will probably from as early as next year have to identify their contracting party and the ultimate beneficiary of a transaction. In the case of unusual transactions, financial intermediaries will have to either refuse the business or inquire into the origin of the assets and the purpose of the transaction. If there is any hint of a criminal dimension, they will further have to notify the Swiss Financial Market Authorities.
How the foreign investor in Switzerland will be affected remains, at this early stage, uncertain. However, most observers think the new Act will entail a slight increase in the administrative burden at the beginning of an investment relationship with a Swiss financial intermediary. Because the proposed Act relies largely on the principle of self-regulation by professional bodies (such as the Association of Independent Asset Managers), some observers point out that affiliation with one of the approved professional organizations will soon be a reliable guide to the competence and honesty of a Swiss finance intermediary. No concern need be felt with respect to the exchange of information with foreign authorities: the proposed Act expressly rules out any new grounds for allowing foreign authorities to obtain information on assets in Switzerland.