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Switzerland Adopts Revised FATF Recommendations

by Ulrika Lomas, for LawAndTax-News.com, Brussels

19 June 2007

The Swiss Federal Council has adopted a draft dispatch on the implementation of the revised FATF (Financial Action Task Force) Recommendations.

The draft, which extends the scope of application of the Anti-Money Laundering Act (MLA) to the fight against terrorist financing, contains several measures which aim to improve the effectiveness of the Swiss system to combating money laundering and terrorist financing, and in general terms are intended to reinforce the protection of Switzerland's financial centre to prevent it from being misused.

According to the Swiss Department of Finance, consideration was given in the draft to ensuring that the administrative burden on financial intermediaries and authorities is kept to a reasonable level, and that the regulatory framework is not extended excessively.

"It should contribute to maintaining a healthy, competitive Swiss financial centre of integrity, which will be of benefit to the Swiss economy as a whole," the department stated, continuing: "Thanks to this draft, Switzerland will in addition contribute even more effectively to the general effort undertaken by the international community to combat money laundering and terrorist financing."

The Financial Action Task Force (FATF) is a key body in the international fight against money laundering and terrorist financing. Its 49 Recommendations constitute an internationally recognised standard to which a country is obliged to adhere in order to be seen to effectively combat money laundering and terrorist financing. Switzerland has been actively involved in the work of the FATF from the beginning and has contributed to defining its standards.

For the first time since its creation, the FATF in 2003 completely revised its Recommendations to adapt them to new forms of criminality in the areas of money laundering and terrorist financing. Switzerland approved these revised Recommendations at the FATF Plenary in June of the same year. Today, Swiss legislation already broadly conforms to the majority of the new FATF standards. In certain areas, however, current Swiss legislation diverges from the revised Recommendations. In January 2005, the Federal Council therefore submitted a proposal on the revised FATF Recommendations for consultation, which was modified in view of the results of the consultation, and following Switzerland's assessment carried out by the FATF in autumn 2005.

The Federal Council has in addition completed preparatory work in the form of a report regarding the "Implementation of the FATF Recommendations abroad and economic consequences of the Recommendations", published on 29 September 2006. The draft dispatch submitted to parliament concentrates on twelve measures which can be broken down into several themes: extension to the fight against terrorist financing; due diligence obligations; minor cases clause; reporting of suspicious transactions; new predicate offences; Special Recommendation IX; exchange of information; and delegation of legislative powers.

With the present proposal, the main shortcomings in the Swiss system identified by the FATF will be rectified, the government has said. As a result, Swiss regulations should to a large extent be in conformity with the revised FATF Recommendations on the issues of substance.

It should also be noted in this regard that in addition to measures at the legislative level, implementation of the revised FATF Recommendations also requires amendments to the ordinances of the competent supervisory authorities in the areas of money laundering and terrorist financing. This work is already at an advanced stage. Thus provisions have been integrated or modified as part of the revision of the Swiss Federal Banking Commission ordinance of 18 December 2002 on money laundering (OBA-CFB), which should be finalised in the autumn of 2007. The revised ordinance of the Federal Office of Private Insurance (OBA-OFAP) came into force on 1 January 2007. The Federal Gaming Board is in the process of drafting revisions to its ordinance which should come into force in the second half of 2007. Finally this picture will be completed by the revision of the Due Diligence Convention (CDB 03) which is due in 2009.

The Finance Department said that the proposal demonstrates Switzerland's "intention to take a more active role in the international community's general efforts to combat money laundering and terrorist financing".

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