Annual Report 2023: FDJP Money Laundering Reporting Office

Over the past decade, the number of SARs has risen by an average of 20–30 % annually. There are many reasons for this. The main driving factor has been the continuous expansion of regulatory due diligence and reporting requirements since 2013.

This has resulted in a significant tightening of financial market supervision and enforcement. The many corruption and money laundering scandals involving a large part of the Swiss banking sector have further heightened awareness of the importance of effectively combating money laundering among financial intermediaries. Many banks have increased the number of staff in their compliance and financial crime departments. In addition, technological progress has enabled them to continuously improve their transaction monitoring capabilities. The switch from paper-based reporting to the IT application goAML (government office Anti Money Laundering) and the XML2 integration on 1 January 2020 have made it easier for financial intermediaries to submit SARs. All of these developments have led to a surge in the volume of SARs received by MROS.

This trend continued in 2023 – although the increase was considerably steeper than expected.

BANNER Terror Finan Invest i-AML

By the end of 2023, MROS had received a total of 11,876 SARs. That is 4,200 more SARs than in the previous year, amounting to a 56 % increase. The reporting volume has risen two-fold over the past two years and ten-fold over the past ten years. This impressive reporting volume requires both an assessment and a forecast for the coming years. MROS and its strategic orientation are significantly affected by this increase. MROS believes that the marked increase in reporting volume can be attributed to the following factors:

– Anchoring the definition of reasonable grounds for suspicion in legislation:

The ‘SIF proposal’ came into force on 1 January 2023. This means that the concept of ‘reasonable grounds for suspicion’, which had already been established in practice and case law over the past decade, has now also been legally anchored (Art. 9 para. 1quater AMLA). Accordingly, financial intermediaries are now required to always submit a SAR if there is a specific indication or several indications that assets could be of criminal origin and if these suspicions cannot be ruled out through their own clarification procedures. Some of the reporting volume is most likely due to the now unambiguous wording of this new legislative provision.

– More rigorous application of Art. 37 AMLA:

The criminal penalties for failing to comply with the reporting obligation have been toughened. Analysis of the judgments of the Federal Department of Finance (FDF) and the Federal Criminal Court (FCC) shows that compliance officers from lower hierarchies are now increasingly being held accountable as well.

The number of convictions for negligent breach of reporting obligations has also increased.

Discussions with financial industry representatives have made it clear that this stricter practice is having an impact on the sector and is therefore also influencing behaviour. The prevailing sentiment is that it is better to report too much than too little.

– Audit firms and (internal) auditors with stricter standards:

Feedback from financial intermediaries suggests that audit firms and internal control bodies tend to assess compliance with regulatory AML requirements more strictly. This is most likely due to the general tightening of the supervisory and AML measures combined with greater media focus on the audit issue.

– Financial intermediaries with asymmetric

business models are under increasing cost pressure: The cost pressure placed on the financial industry is palpable. In some instances, suspicions are only clarified in a very rudimentary manner and the special duties of due diligence under Art. 6 AMLA, which are mandatory for a SAR to MROS, are no longer or only insufficiently carried out. This trend is particularly noticeable among financial institutions not involved in wealth management that have aggressive onboarding programmes for foreign clients. Most of these inadequately clarified SARs are of no value to MROS. With this behaviour, financial intermediaries are no longer or inadequately fulfilling their role as the ‘first line of defence’ in the AML system. MROS is in dialogue with FINMA about the financial intermediaries concerned and the measures taken.

It can be assumed that the reporting surge will continue in 2024 and beyond. Experience shows that such developments are generally irreversible. Once the described reporting behaviour has been established, it becomes the standard. The financial industry is unlikely to change course, especially as the signals from the law enforcement and supervisory authorities as well as the Financial Action Task Force on Money Laundering (FATF) tend to point to a tightening of the rules. We can therefore expect even greater reporting volumes in the future. MROS is only partially equipped for a further increase in the reporting volume – similar to what was experienced in 2023 – and is reaching the limits of its human and technical resources. By applying the ‘risk-based approach’ (see Chap. 2.2), increasing numbers can be absorbed by tightening the criteria for triage. However, this also means that the decisive factor in the decision to analyze a SAR would no longer be the risk but the resource situation.

May 1, 2024 Published by The Federal Department of Justice and Police FDJP. (Download PDF Report)

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