Money laundering (2024)

Breaches of due diligence and reporting obligations can result in legal consequences and reputational damage for financial institutions both in Switzerland and abroad and harm the reputation of the Swiss financial centre. Financial institutions must ensure they comply with the risk tolerance they have defined, which must be commensurate with their business activities, and mitigate the remaining risks effectively with suitable control systems.
The Swiss financial centre has not been left unscathed by money laundering scandals in the past. A whole host of cases have shown that financial intermediaries’ compliance capabilities must keep pace with the risks they incur. The annual money laundering risk analysis plays an important role in this. An effective anti-money laundering policy is based on the financial intermediary’s executive management striking the right tone from the top and setting a clearly defined risk tolerance. This includes not doing business with particularly risky clients, countries of origin, or services. Firms must ensure that the tolerated risks can be monitored and limited effectively at all times.
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Clients from high-risk countries (e.g. public officials or leading figures in state or quasi-state companies) pose particularly high money laundering, legal, and reputational risks. If large assets are accumulated in such circumstances, there is a risk of becoming involved in predicate offences to money laundering, such as embezzlement, bribery, or fraud. Stringent requirements must be set for the information to be obtained by financial intermediaries for such clients. The origin of the funds must be investigated in detail, and the institution must ensure that the funds derive from legal sources.
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Alongside the money laundering risks in cross-border asset management, risks in the crypto space are becoming increasingly apparent. Cryptocurrencies are often used in cyberattacks or as a means of payment for illegal trading on the dark web. Some analyses have also shown a big rise in the use of stablecoins for illicit transactions, particularly in relation to sanctions evasion. Money laundering risks can be considerable for financial intermediaries with a crypto offering. Financial intermediaries active in this area without adequate management of money laundering risk can seriously damage the reputation of the Swiss financial centre.
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The conflict in the Middle East has demonstrated that preventing the financing of terrorism is an important task in financial intermediaries’ anti-money laundering policies. Alongside money laundering risks, weaknesses in this area pose increased legal and reputational risks.
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(From the Risk monitor 2024)