The Swiss regulatory environment in private wealth advising – a major challenge and risk factor. Find the necessary information for your work in this blogpost.
In private wealth advising the Swiss and international regulatory environment is a major challenge and risk factor. In this blogpost you will find all the necessary information about the latest key Swiss and international regulations which are applicable to Private Wealth Advisors.
In the wake of the financial crisis a number of new international regulatory requirements have been implemented by governing bodies. Failure to comply with these requirements means risking sanctions and penalties.
It is not surprising therefore that regulatory compliance ranks high on private wealth advisors’ risk scores. Thorough identification, assessment and implementation of regulatory requirements and duties are indispensable.
Latest Swiss regulations applicable to Private Wealth Advisors
Automatic exchange of information
FATCA (Foreign Account Tax Compliance Act)
The Swiss FATCA law was enacted on the basis of the intergovernmental agreement between the US and Switzerland and came into effect on 1 July 2014. Under this law, Swiss banks and other Swiss financial institutions are obliged to register with the IRS and to report to the US tax authorities information regarding these so-called US accounts.
CRS/AEoI (Common Reporting Standard / Automatic Exchange of Information)
Switzerland has signed bilateral agreements with numerous jurisdictions to mutually exchange information on personal and financial data of reportable persons from 1 January 2018 onwards (based on financial data of 2017). Swiss Financial Institutions will report these data to the Swiss tax authorities who will then forward it to the relevant local tax authorities of the reportable person.
Anti-Money Laundering Legislation
In response to the adapted FATF Recommendations Switzerland implemented its amended AML legislation with effect from 1 January 2016, comprising of the amendedAnti-Money Laundering Act (AMLA), the amended Anti-Money Laundering Ordinance (AMLO) and the amended FINMA Anti-Money Laundering Ordinance (AMLO-FINMA 2016). Key changes to the previous legislation are, amongst others: qualified tax offences are deemed predicate offences to money laundering, enhanced transparency regarding bearer shares, duty of due diligence for merchandisers (real estate brokers, art dealers, etc.) when accepting cash payments exceeding CHF 100’000, new due diligence obligations and reporting duties for traders, adjusted concept of “controlling person”, etc.
FINMA Anti-Money Laundering Ordinance (amended AMLO-FINMA)
In response to the FATF Mutual Evaluation Report published in December 2016, the Swiss Financial Markets Supervisory Authority (FINMA) launched consultation on their draft amendment to AMLO-FINMA 2016 on 4 September 2017. The revised AMLO-FINMA 2016 is planned to enter into force in 2019. Key changes comprise the requirement to verify information on the beneficial ownership for all clients, including low-risk clients, regular updates of all client information and the lowering of the identification-threshold for cash transactions and unlisted collective investment schemes subscriptions from CHF 25’000 to CHF 15’000.
BEPS (OECD Action Plan on Base Erosion and Profit Shifting)
On 7 June 2017 Switzerland and several other jurisdictions signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The MLI provides the basis for amendments to existing double taxation treaties in line with the OECD BEPS minimum standards which serve to counter aggressive tax planning by multinationals.
During its meeting on 18 October 2017, the Federal Council decided to bring the Federal Act on the International Automatic Exchange of Country-by-Country Reports of Multinationals (CbC Act) into force on 1 December 2017. The reports have to be prepared by companies operating internationally with an annual turnover of over EUR 750 million (CHF 900 million).
FinSA and FinIA (Financial Services Act and Financial Institutions Act)
- FinSA and FinIA will create uniform competitive conditions for financial intermediaries and improve client protection.
- FinSA sets the requirements for providing financial services and offering financial instruments and is largely aligned with MiFID/MiFID II.
- FinIA sets a harmonised framework for the licensing conditions and organisational requirements for financial institutions subject to prudential supervision. Similar to the existing financial services law it is applicable to banks, portfolio managers, managers of collective assets, fund management companies and securities firms, but in addition subjects managers of individual client assets and trustees to prudential supervision.
- The bills are currently being debated by Parliament and should enter into force in 2019 at the earliest.
Regular reviews and anticipatory monitoring of the regulatory environment are crucial for private wealth advisors and can be effective strategies to mitigate risks and align business strategies within the given regulatory framework at the same time.
Links and information
A very useful overview of current regulatory topics in the financial industry is provided by KPMG Switzerland’s interactive Regulatory Horizon platform .
For further information please also refer to the following links or get in touch with the author.
- KENDRIS AEoI Blog
- KENDRIS AEoI Reporting Solution
- KENDRIS Compliance Services for Individuals and Businesses
- KENDRIS CRS FATCA Mobile Compliance App