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Switzerland Proposes Relaxed AML Rules for New FinTech License

In an effort to stimulate innovation in Switzerland’s financial markets, the Swiss Financial Market Supervisory Authority (“FINMA”), announced its plans to relax anti-money laundering requirements for certain smaller financial technology firms. If implemented, these plans would go into effect on January 1, 2019.

“FinTech” Licenses

The move came after the announcement by the Swiss parliament of its new “FinTech” license in June.  This licensing category was created for businesses using innovative financial technology, including initial coin offerings and artificial intelligence.

The new license, which would be subject to Switzerland’s Banking Act, will be available to any company that neither accepts public deposits of more than CHF 100 million from individual investors nor engages in commercial banking. The Swiss Federal Department of Finance’s consultation regarding the FinTech license will run until September 21, 2018.

It is expected that the implementation of the FinTech license will boost innovation and reduce barriers to market entry for financial technology firms.

Revisions to the Swiss Anti-Money Laundering Laws

With the imminent launch of the new FinTech license, small institutions, with limited resources and capabilities, would be subject to the Swiss Anti-Money Laundering Act (“AMLA”) and its due diligence requirements.  As a result, FINMA, Switzerland’s independent financial-markets regulator, has taken steps to revise its anti-money laundering requirements. FINMA’s main function is to supervise financial institutions and it is charged with protecting creditors, investors, and stakeholders.

“As a rule, all financial institutions are subject to similar due diligence requirements relating to combating money laundering. However, as most FinTech licence applicants are likely to be smaller institutions, FINMA proposes to introduce some organisational relaxations for such institutions,” said FINMA in a statement published Tuesday.

Under Article 25 of FINMA’s Anti-Money Laundering Ordinance (“AMLO-FINMA”), financial institutions are required to follow directives to combat money laundering.  Specifically, banks must establish an independent anti-money laundering unit with monitoring and customer due diligence duties.  Under the proposed looser AML requirements, small institutions, meaning those with annual gross revenues of less than CHF 1.5 million, would be exempt from having to establish this oversight unit.

Switzerland has also proposed substantial revisions to the AMLO-FINMA relating to a review conducted by the Financial Action Task Force which identified a range of weaknesses in Switzerland’s anti-money laundering regime.  The new AMLO-FINMA will become effective on January 1, 2020, giving those subject to the changes time to conform to the new rules.

Period for Comment

Businesses have until October 26, 2018, to comment on and respond to the proposed rule changes related to the relaxed AML requirements for FinTech firms.  The changes are scheduled to go into effect on January 1, 2019, simultaneously with Switzerland’s revised Banking Act.

© Copyright 2021 Squire Patton Boggs (US) LLPNational Law Review, Volume VIII, Number 241
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About this Author

Elizabeth Weil Shaw attorney Squire Patton Boggs
Associate

Elizabeth Weil Shaw assists clients primarily with government enforcement actions and inquiries, as well as internal investigations and compliance reviews. Liz has analyzed matters involving investigations by the US Securities and Exchange Commission, Department of Justice and State Attorneys General. She is a contributor to the firm's Anticorruption Blog.

303-830-6129
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