Assessment of the measures to combat money laundering and the financing of terrorism and proliferation in Switzerland: ratings, key findings and priority actions.

1. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 1
Anti-money laundering and counter-
terrorist financing (AML/CFT)
measures in Switzerland
Fourth Round Mutual Evaluation
Key findings, ratings and priority actions
December 2016
www.fatf-gafi.org/publications/mutualevaluations/documents/mer-switzerland-2016.html

2. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016
Ratings – Effectiveness (1/3)
2
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Switzerland
has achieved
this objective
1. ML and TF risks are understood and, where appropriate,
actions co-ordinated domestically to combat ML and TF
Substantial
2. International co-operation delivers appropriate information,
financial intelligence, and evidence, and facilitates action
against criminals and their assets
Moderate
3. Supervisors appropriately supervise, monitor and regulate
financial institutions and designated non-financial
businesses and professions (DNFBPs) for compliance with
AML/CFT requirements commensurate with their risks.
Moderate
4. Financial institutions and DNFBPs adequately apply AML/CFT
preventive measures commensurate with their risks, and
report suspicious transactions.
Moderate

3. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 3
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Switzerland
has achieved
this objective
5. Legal persons and arrangements are prevented from misuse
for money laundering or terrorist financing, and information
on their beneficial ownership is available to competent
authorities without impediments
Moderate
6. Financial intelligence and all other relevant information are
appropriately used by competent authorities for money
laundering and terrorist financing investigations.
Substantial
7. Money laundering offences and activities are investigated
and offenders are prosecuted and subject to effective,
proportionate and dissuasive sanctions
Substantial
8. Proceeds and instrumentalities of crime are confiscated. Substantial
Ratings – Effectiveness (2/3)

4. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 4
Immediate outcome of an effective system to combat money
laundering (ML) and terrorist financing (TF)
Extent to
which
Switzerland
has achieved
this objective
9. Terrorist financing offences and activities are investigated
and persons who finance terrorism are prosecuted and
subject to effective, proportionate and dissuasive sanctions.
Substantial
10. Terrorists, terrorist organisations and terrorist financiers are
prevented from raising, moving and using funds, and from
abusing the non-profit sector.
Substantial
11. Persons and entities involved in the proliferation of weapons
of mass destruction are prevented from raising, moving and
using funds, consistent with the relevant United Nations
Security Council Resolutions.
Substantial
Ratings – Effectiveness (3/3)

5. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 5
Ratings – Effectiveness
7-Dec-2016
0
7
4
0
High
Substantial
Moderate
Low

6. 7-Dec-16
6
Ratings – technical compliance
(1/5)
AML/CFT POLICIES AND COORDINATION
1. Assessing risks & applying a risk-based approach LarLarLarLar Largely compliant
2. National cooperation and coordination LarLarLarLar Largely compliant
MONEY LAUNDERING AND CONFISCATION
3. Money laundering offence LarLarLarLar Largely compliant
4. Confiscation and provisional measures LarLarLarLar Largely compliant
TERRORIST FINANCING AND FINANCING OF PROLIFERATION
5. Terrorist financing offence LarLarLarLar Largely compliant
6. Targeted financial sanctions related to terrorism & terrorist
financing LarLarLarLar Largely compliant
7. Targeted financial sanctions related to proliferation ComCo Co Co Compliant
8. Non-profit organisations ParPa Pa Pa Partially compliant

7. 7-Dec-16
7
Ratings – technical compliance
(2/5)
PREVENTIVE MEASURES
9. Financial institution secrecy laws Co Co ComCom Compliant
Customer due diligence and record keeping
10. Customer due diligence Pa Pa ParPar Partially compliant
11. Record keeping Co Co ComCom Compliant
Additional measures for specific customers and activities
12. Politically exposed persons LarLarLarLar Largely compliant
13. Correspondent banking LarLarLarLar Largely compliant
14. Money or value transfer services Co Co ComCom Compliant
15. New technologies LarLarLarLar Largely compliant
16. Wire transfers Pa Pa ParPar Partially compliant

8. 7-Dec-16
8
Ratings – technical compliance
(3/5)
PREVENTIVE MEASURES (continued)
Reliance, Controls and Financial Groups
17. Reliance on third parties LarLarLarLar Largely compliant
18. Internal controls and foreign branches and subsidiaries LarLarLarLar Largely compliant
19. Higher-risk countries Pa Pa Pa Par Partially compliant
Reporting of suspicious transactions
20. Reporting of suspicious transactions LarLarLarLar Largely compliant
21. Tipping-off and confidentiality LarLarLarLar Largely compliant
Designated non-financial Businesses and Professions (DNFBPs)
22. DNFBPs: Customer due diligence Pa Pa Pa Par Partially compliant
23. DNFBPs: Other measures Pa Pa Pa Par Partially compliant
TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL
PERSONS AND ARRANGEMENTS
24. Transparency and beneficial ownership of legal persons LarLarLarLar Largely compliant
25. Transparency and beneficial ownership of legal
arrangements LarLarLarLar Largely compliant

9. 7-Dec-16
9
Ratings – technical compliance
(4/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES
Regulation and Supervision
26. Regulation and supervision of financial institutions LarLarLarLar Largely compliant
27. Powers of supervisors LarLarLarLar Largely compliant
28. Regulation and supervision of DNFBPs LarLarLarLar Largely compliant
Operational and Law Enforcement
29. Financial intelligence units Co Co Co Com Compliant
30. Responsibilities of law enforcement and investigative
authorities Co Co Co Com Compliant
31. Powers of law enforcement and investigative authorities LarLarLarLar Largely compliant
32. Cash couriers LarLarLarLar Largely compliant

10. 7-Dec-16
10
Ratings – technical compliance
(5/5)
POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES
AND OTHER INSTITUTIONAL MEASURES (continued)
General Requirements
33. Statistics Pa Pa ParPar Partially compliant
34. Guidance and feedback LarLarLarLar Largely compliant
Sanctions
35. Sanctions Pa Pa ParPar Partially compliant
INTERNATIONAL COOPERATION
36. International instruments LarLarLarLar Largely compliant
37. Mutual legal assistance LarLarLarLar Largely compliant
38. Mutual legal assistance: freezing and confiscation LarLarLarLar Largely compliant
39. Extradition LarLarLarLar Largely compliant
40. Other forms of international cooperation Pa Pa ParPar Partially compliant

11. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016 11
Ratings – technical compliance
7-Dec-2016
6
25
9
0
Compliant
Largely compliant
Partially compliant
Non compliant

12. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016
Key findings
 Swiss authorities generally have a good understanding of the
risks of ML/TF, which was furthered by the first National Risk
Assessment (NRA) published in June 2015. In 2013, Switzerland
set up an AML/CFT co-ordination and cooperation body to bring
AML/CFT strategy and policies in line with changes in identified
risks.
 The Swiss financial system is exposed to a high risk of ML
associated with the laundering of assets derived from offences
that are mostly committed abroad. Banking, in particular private
banking, is the sector most exposed to these risks. A number of
important aspects specific to Switzerland, such as the use of cash
or legal persons in general, including domiciliary companies, have
not yet been analysed in detail with regard to the ML/TF risks to
be included in the NRA. The risk of TF is more limited, but
outreach is required to raise the awareness of non-profit
organisations (NPOs).
127-Dec-2016

13. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016
Key findings
7-Dec-2016 13
 The Swiss AML/CFT framework has been developed using a risk-
based approach and reflects the high risk level associated with
the banking sector. In general, Swiss authorities take identified
risk into account in their objectives and activities.
 In general, financial institutions and designated non-financial
businesses and professions (DNFBPs) understand the ML/FT risks
they face and their associated obligations. Overall, they apply
measures commensurate with their risks, although classification
of customers into inappropriate risk categories can undermine
this approach. The implementation of due diligence measures
with existing customers is not always satisfactory, particularly for
longstanding customers of banks and asset managers classified as
low risk at the beginning of the relationship, and where the
source of funds was not always identified in line with current
requirements.

14. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016
Key findings
 The number of suspicious transaction reports (STR) has
been steadily increasing for several years following
awareness-raising campaigns for reporting entities led by
the Swiss authorities. However, the number remains
insufficient, and most of them are produced in response to
external information sources, usually when there is a
grounded suspicion of ML/TF. FINMA needs to increase
supervision and sanctions regarding compliance with the
reporting requirement.
147-Dec-2016

15. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016
Key findings
157-Dec-2016
 The approach to AML/CFT supervision in Switzerland generally
encourages a continuous monitoring of financial institutions and
DNFBPs. The authority of the Swiss Financial Market Supervisory
Authority (FINMA) is recognised by self-regulatory bodies (OARs)
and the institutions/professionals it supervises directly. While
this means that the remedial measures imposed by FINMA are
generally complied with, its sanction policy for serious violations
of AML/CFT obligations remains inadequate, as does that of the
OARs. Furthermore, OARs are inconsistent in the way in which
they take risk into account in their supervision activities. Work
should continue in order to align the supervision practices of
FINMA and OARs, particularly for the highest risk sectors such as
fiduciaries. The general quality of AML/CFT audits still needs to
be improved, and should include more detailed controls by
FINMA

16. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016
Key findings
 The Swiss authorities demonstrate a clear commitment
to prosecute ML. Large-scale complex investigations are
carried out, particularly using the high-quality
intelligence provided by MROS on both a federal and
cantonal level. Convictions have been obtained for all
types of ML, especially in cases involving predicate
offences committed abroad, which reflects the
international exposure of Switzerland as a major
financial centre. Assets have also been confiscated in
cases where no conviction could be obtained.
Investigations, prosecutions and confiscations are
generally consistent with the risks identified. However,
progress still needs to be made in imposing sanctions
that are proportionate and sufficiently dissuasive.
167-Dec-2016

17. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016
 The mutual legal assistance provided by Switzerland is
generally satisfactory and has involved the freezing and
restitution of large sums linked with international
corruption, but shortcomings associated with
maintaining the confidentiality of requests have been
observed. MROS and FINMA work jointly with their
foreign counterparts at a level that corresponds to the
international nature of the Swiss financial centre.
However, there are some limits to this co-operation,
which affect information sharing by MROS
7-Dec-2016 17
Key findings

18. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016
Priority Actions for Switzerland to
strengthen its AML/CFT System
187-Dec-2016
 Supervisors should strengthen their controls of
compliance with reporting requirements, with sanctions
for institutions in violation.
 Supervisors should align their approaches to risks and
control procedures for high-risk institutions supervised
by FINMA or OARs, such as fiduciaries.
 Supervisors should ensure they issue proportionate and
effective sanctions for serious violations of supervision
law by financial intermediaries through binding
measures other than findings decisions or corrective
measures

19. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016
Priority Actions for Switzerland to
strengthen its AML/CFT System
 The recent initiative to collect statistics should be continued
in order to measure the results of the work of law
enforcement and investigation authorities and adjust
prosecution measures if necessary.
 Switzerland should reinforce its analysis of ML/TF risks
associated with the use of cash and legal persons. On the
basis of this analysis, authorities should produce and
implement suitable actions for managing and controlling
risks.
197-Dec-2016

20. Anti-money laundering and counter-terrorist financing measures in Switzerland – Mutual Evaluation Report – December 2016
Priority Actions for Switzerland to
strengthen its AML/CFT System
 In order to strengthen international cooperation in
AML/CFT, the Swiss authorities should take the
measures required to ensure the confidentiality of
mutual assistance requests and remove the limits on
the scope of information that MROS can exchange.
 The Swiss authorities should ensure that sanctions for
ML and TF offences are sufficiently dissuasive.