Swiss Federal Law on the transparency of legal entities and identification of beneficial owners
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Swiss Federal Law on the transparency of legal entities and identification of beneficial owners
DR. BIRGUL COTELLI, Senior Director, C-suite Program Attendant, Risk & Compliance
https://swissfintechladies.ch/sftl-authors/
Swiss Federal Law on the transparency of legal entities and identification of beneficial owners
This article discusses the consequences of implementing a new Swiss federal law on transparency for legal entities and other legal structures in Switzerland and focuses on the impact on advisors, lawyers, cantons, and the broader economy. It is in consultation phase where interested parties are solicited to provide their inputs until the end of November 2023. The law aims to enhance transparency, combat money laundering, and strengthen Switzerland's financial and economic reputation.
There are some anticipated consequences:
Measures proposed will impact the diligence requirements for advisors and lawyers. The new law introduces diligence obligations for advisors and lawyers, which will be overseen by self-regulatory bodies or cantonal supervisory authorities. The Federal Department Finance (FDF) may impose financial sanctions in cases of serious or repeated violations. Resources will be impacted under the new administrative authority of the FDF, responsible for imposing financial sanctions on financial intermediaries and advisors.
The number of sanctions imposed by self-regulatory bodies in the last five years averaged around 170 per year, with an expected increase due to expanded regulations. Various other measures proposed in the partial revision of the Anti-Money Laundering Act (LBA) are not expected to have significant costs for the Confederation.
Impact on Cantons will show itself in the Cantonal authorities’ responsibility for commercial registers playing a role in implementing new reporting requirements, transmitting information about beneficial owners to the economic ownership register. This additional activity is generally associated with business registrations and should result in limited additional costs, though these cannot be precisely quantified. For cantonal supervisory authorities overseeing lawyers subject to the Swiss Lawyers Act (LLCA), additional costs may arise as they integrate their oversight of lawyers' compliance with anti-money laundering obligations.
Not to forget the economic consequences in transparency benefits, the new law aligns Switzerland with international recommendations and enhances the fight against money laundering, preserving the country's financial and economic attractiveness. The introduction of the registry and expanded obligations may initially increase administrative burdens for businesses.
Businesses currently not subject to ownership transparency regulations may face additional costs for compliance. However, these costs will primarily affect a small fraction (about 2.5%) of entities under the law. The cost-benefit ratio for financial intermediaries will depend on the quality and design of the registry. The usage of the registry may lead to both increased costs related to reporting discrepancies and savings from simplified due diligence procedures.
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