FINMA consults on changes to anti-money laundering rules due to new FinTech licensing category

The quickly evolving world of fintech is prompting regulatory reforms. The Swiss Financial Market Supervisory Authority (FINMA) has earlier today opened a consultation on proposed changes to its Anti-Money Laundering Ordinance (AMLO-FINMA) which reflect the emergence of a new licensing category – one for FinTech companies.

In June this year, the Swiss parliament established a new licensing category, known as the FinTech licence, seeking to promote financial market innovation. This new licensing category under the Banking Act (BA) will apply to institutions which accept public deposits of up to CHF 100 million but which do not invest or pay interest on them.

These entities will be subject to the Anti-Money Laundering Act (AMLA) and its due diligence requirements. As a result, it has become necessary to revise the FINMA Anti-Money Laundering Ordinance (AMLO-FINMA). The corresponding due diligence requirements under AMLA must now be defined in detail for institutions which will belong to this new category.

The partial revision of AMLO-FINMA sets out the duties of due diligence for future FinTech licence holders. Since entities under Article 1b of the Banking Act are expected to be small institutions, less stringent organisational requirements than those applicable to banks are proposed below certain thresholds. This applies in particular to the requirement that banks set up an independent competence center for money-laundering issues entrusted with control tasks.

In principle, the same duties of due diligence under anti-money laundering legislation as for directly subordinated financial intermediaries (DSFIs) will apply in view of their similar size. In contrast to DSFIs, however, entities under Article 1b of the Banking Act accept deposits from the public and thus engage in higher-risk business, so not all of the relief granted to DSFIs will be applicable to them.

Let’s note that “small” institutions are those with gross revenues of less than CHF 1.5 million.

The consultation on AMLO-FINMA will last until October 26, 2018. The Federal Council aims to implement the partially revised Banking Act with effect from January 1, 2019. If possible, the amendments to AMLO-FINMA will enter into force at the same time.

Let’s recall that, in July this year, FINMA announced a revision of its Anti-Money Laundering Ordinance. The changes formed part of an overall package and included measures resulting from the FATF’s valuation report on Switzerland. They also take account of feedback from the consultation phase and are set to enter into effect on January 1, 2020.

The Financial Action Task Force (FATF) had identified a range of weaknesses in Switzerland’s arrangements for combating money laundering and the financing of terrorism. As a result, Switzerland is now engaged in an enhanced follow-up procedure. To exit this procedure successfully, Switzerland will have to implement a number of changes, which includes amending the AMLO-FINMA.

The revised FINMA Anti-Money Laundering Ordinance (AMLO-FINMA) addresses shortcomings identified in the FATF country review and incorporates findings from FINMA’s supervisory and enforcement practice.

The amended AMLO-FINMA outlines in more detail the requirements for global monitoring of these risks. This affects Swiss financial intermediaries with branches or group companies outside Switzerland. It also specifies the risk management measures which must be put in place if domiciliary companies or complex structures are used or if there are links with high-risk countries. In addition, FINMA has reduced the threshold for identification measures for cash transactions to the FATF level of CHF 15,000.