The Swiss Financial Market Supervisory Authority (FINMA) has identified deficiencies in the anti-money laundering and counter-terrorist financing (AML/CFT) risk analyses of many examined banks. These deficiencies, including inadequately defined risk tolerances, can impede the banks’ ability to implement effective risk controls. Here are key takeaways and considerations for Swiss banks:
- Deficient AML/CFT Risk Analyses: FINMA’s recent on-site reviews revealed shortcomings in the money laundering risk analysis of many banks. These deficiencies are related to unclear risk tolerances and inadequate risk analyses.
- Requirements for Effective Risk Management: To adequately assess and manage risks, banks must have a thorough and regularly updated analysis that clearly identifies risks and establishes tolerance levels. This includes due diligence processes, risk assessments, reporting, and oversight for regulatory compliance.
- Key AML Deficiencies: The identified weaknesses include unclear risk tolerances, lack of exclusions for key entities, products, or sectors, and inadequate risk analyses that are overly general, not updated yearly, and lack resource evaluations.
- Proposed Regulatory Changes: The Swiss Federal Council plans to strengthen Switzerland’s AML/CFT framework with proposed changes, including the introduction of a federal register of companies and beneficial owners, broadening due diligence requirements, and implementing measures to prevent sanctions evasion.
- Response for Swiss Firms: Swiss firms, especially those in the banking industry regulated by FINMA, should review the regulator’s report to understand deficiencies in AML risk analyses. Consider renewing and enhancing risk analysis processes, including the use of technology, such as artificial intelligence, for more robust due diligence.
- Consultation on Regulatory Changes: Stay informed about the ongoing consultation on the proposed regulatory changes, which concludes on November 29, 2023. Participate in the consultation process to provide feedback and input on the proposed measures.
Swiss banks should prioritize addressing deficiencies in their AML/CFT risk analyses to enhance their risk management processes and ensure compliance with regulatory requirements.
By FCCT Editorial Team
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