Switzerland

1. Does Switzerland have legislation making it a criminal offence to engage in money laundering and/or terrorist financing?

Yes.

Money laundering

Money laundering is punishable under art. 305bis of the Swiss Criminal Code (“CC”).

Violating the duty to report money laundering activities is also punishable under art. 37 of the Federal Act on Combating Money Laundering and Terrorist Finance (hereinafter referred as “AMLA”), which is applicable to financial intermediaries (please see question 8).

The FINMA (Swiss Financial Market Supervisory Authority) Anti-Money Laundering Ordinance sets out the requirements for the professional practice of financial intermediation and the due diligence obligations and reporting duties which traders must fulfil.

All applicable international standards, in particular the FATF-Recommendations (as amended from time to time).

Terrorist financing

The Swiss criminal legal system contains a range of provisions that effectively fight and punish terrorist financing. The specific norm against terrorist financing is art. 260quinquies Swiss Criminal Code.

2. To whom does the legislation apply?

Money laundering

• Swiss Criminal Code: the legislation applies to all persons (individuals or entities) that engage in money laundering;
• AMLA: the legislation applies to financial intermediaries and to natural persons and legal entities that deal with goods commercially and in doing so accept cash (brokers).

Terrorist financing

The legislation applies to all persons (individuals or entities) that engage in terrorist financing.

3. What does the legislation prohibit?

Money laundering

• Swiss Criminal Code: the legislation prohibits any person who carries out an act that is aimed at frustrating the identification of the origin, the tracing or the forfeiture of assets which he knows or must assume originate from a felony or aggravated tax misdemeanour;
• AMLA: the legislation requires financial intermediaries to apply strict due diligence obligations towards their clients (KYC, identification, clarification, analyse of the rationales of a transaction etc) and to report suspicions of money laundering.

Terrorist financing

The legislation prohibits any person who collects or provides funds with a view to financing a violent crime that is intended to intimidate the public or to coerce a state or international organisation into carrying out or not carrying out an act.

4. How is money laundering defined? Does underlying criminal activity have to be proven?

From a criminological point of view, money laundering can be defined as “an activity that consists of the integration into the ordinary economic circuit of funds that are the product of criminal activity, with the aim of concealing their criminal origin(s) by making the funds permanently legitimate to other actors”.

Fearing that the difficulty of establishing in detail the circumstances of the underlying criminal activity could complicate and slow down the action of the criminal justice system, the Swiss Federal Court has considerably relaxed the requirements in this area and abandoned the strict proof of the underlying criminal activity. Nevertheless, in order to pursue the act of money laundering, the public prosecutor has to at least ensure that the facts are elucidated with sufficient precision so that the tainted assets can be causally attributed to a criminal origin.

5. What level of intent or knowledge is required to establish a violation?

Money laundering

Money laundering is an intentional offence. By stating that the person knew or should know that the assets were the proceeds of a crime, the law refers to intent, at least through possible wilfulness. In other words, it is sufficient that the person is aware of circumstances that give rise to a suspicion of facts that legally constitute a crime and that he accepts the possibility that these facts have occurred. It should be noted that money laundering can be committed by omission. It is therefore necessary that the person remains inactive in disregard of a special legal duty to act and that this behaviour results in money laundering (hypothetical causality).

Terrorist financing

The person must act with the intent to finance an act of terrorism. For the offence to be committed, it is not necessary to establish a causal link between the financing and a terrorist act, or even that such an act is actually committed. It is sufficient that the person had the intention to finance a terrorist act.

6. What are the potential penalties for infringing the legislation?

Money laundering

The person who commits an act of money laundering shall be punished by a custodial sentence of up to three years or a monetary penalty (art. 305bis cipher 1 CC). In serious cases, the penalty shall be custodial sentence of up to five years or a monetary penalty (art. 305bis cipher 2 CC).

The case is serious when the offender a) acts as a member of a criminal organisation; b) acts as a member of a gang formed to engage in systematic money laundering; c) makes a significant amount of money or profit from the business of laundering money.

Terrorist financing

The person who commits an act of terrorist financing shall be punished by a custodial sentence of up to five years or a monetary penalty (art. 260quinquies para. 1 CC).

7. Does the legislation have extra-territorial reach?

Yes, both the money laundering and terrorist financing sanctions have extra-territorial reach.

According to art. 305bis para. 3 CC, “the offender is also liable to the foregoing penalties where the main offence was committed abroad, provided such an offence is also liable to prosecution at the place of commission”.

It should be noted that Switzerland supports the fight against money laundering and terrorist financing, in particular through its involvement in the Financial Action Task Force (hereinafter referred as “FATF”). Switzerland participated in the elaboration of the 40 recommendations issued by the FATF, which constitute the internationally recognized standards in the field of money laundering and terrorist financing.

8. Are there additional anti-money laundering or counter terrorist financing regulations or obligations, such as registration or reporting obligations, for businesses or individuals that operate in particular sectors or undertake particular activities?

Money laundering: The AMLA provides for a specific reporting obligation for financial intermediaries.

It cases of suspicion of money laundering or terrorist financing, the financial intermediary will first ask himself/herself whether he/she is in the presence of the following elements:

• Is there a connection to an offence related to a criminal or terrorist organisation or to money laundering?
• Are the involved assets the proceeds of a felony or an aggravated tax misdemeanour?

Are the involved assets subject to the power of disposal of a criminal or terrorist organisation, or serving the financing of terrorism? If the answer to any one of the above questions is yes, then the financial intermediary must make a report to the competent authorities (Article 9 AMLA: Duty to report).

Pursuant to the actual practice of the Swiss anti-money laundering supervisory authorities, business relationships with persons and organizations that are on international sanctioned lists are subject to a well-founded suspicion under art. 9 AMLA and require the financial intermediary to report such business relationships without delay to MROS and at the same time to freeze the assets.

9. What are the potential penalties for failing to comply with these obligations?

Any person who fails to comply with the duty to report in terms of Article 9 AMLA shall be liable to a fine not exceeding 500,000 Swiss francs.

If the offender acts through negligence, he or she shall be liable to a fine not exceeding 150,000 Swiss francs. Furthermore, in the case of a regulated financial intermediaries, FINMA will open an enforcement proceeding and punish the financial intermediary with regulatory sanctions.

10. Who are the relevant enforcement authorities in Switzerland and what are their contact details?

Federal Office of Police, Money Laundering Reporting Office Switzerland (MROS)

Guisanplatz 1A

3003 Bern

Switzerland

Prosecution authorities such as: