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Swiss Financial Regulator Unveils Widespread AML Deficiencies Across 30 Banks

A scathing report released by Switzerland's financial regulator, FINMA, has revealed a series of fundamental anti-money laundering (AML) failings in a comprehensive review of 30 banks. The investigation was conducted earlier this year following the identification of deficiencies in the AML realm.

Swiss Financial Regulator Unveils Widespread AML Deficiencies Across 30 Banks

The report highlighted serious inadequacies, with some banks lacking a proper definition of their money laundering risk tolerance, a crucial framework for robust risk analysis. The regulator noted that this deficiency extended to an absence of various essential structural elements necessary for effective risk analysis.

In particular, the review underscored several glaring AML shortcomings:

  1. Many banks did not incorporate deliberate exclusions of specific countries, client segments, services, or products as part of their risk tolerance definitions.

  2. A lack of appropriate processes for exceptions to defined risk tolerance was evident, depriving executive boards of the authority to approve exceptions and necessitated risk mitigation measures.

  3. Most banks failed to establish key risk indicators, a critical tool for monitoring compliance with risk tolerance and enabling regular supervision by the executive board and board of directors.

The regulator cited Article 8 of the Anti-Money Laundering Act (AMLA), stipulating that banks must take necessary measures to prevent money laundering and terrorist financing. Among these measures is the preparation of a comprehensive risk analysis.

FINMA's scrutiny uncovered deficiencies in risk assessment breakdowns, especially concerning inherent and control risks. The report pointed out that these breakdowns were often missing for each money laundering risk category. Additionally, descriptions of risk-mitigating measures taken by institutions were frequently too generic to gauge their impact on inherent risks effectively.

The report noted that banks were required to individually record the relevance of criteria listed in Article 13 para. 2 AMLO-FINMA when identifying business relationships with elevated risks. However, such assessments were often presented in a way that lacked clarity and comprehensibility to external parties, with a deficiency in defined key figures to assess criterion relevance.

In its concluding remarks, FINMA stressed the importance of the money laundering risk analysis as a strategic tool for banks and financial intermediaries. This analysis aids in identifying and mitigating money laundering risks, defining pertinent risk criteria for a financial institution's activities, and establishing which risks fall beyond the institution's risk tolerance.

The report also delved into other areas, including corporate governance within banks and the necessity for global monitoring of money laundering risks. It emphasized that compliance with established regulations, such as Article 25 para. 2 AMLO-FINMA, was imperative in maintaining effective risk analysis and management across international branch offices and financial groups.

The revelations within the report underscore the critical need for Swiss banks to overhaul their AML practices, ensuring compliance and robust risk analysis in a rapidly evolving financial landscape



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