Money Laundering and Tax Implications in Switzerland
The fight against money laundering and its tax implications is a major issue in Switzerland, a country traditionally recognised for its financial centre. The Swiss legal framework in this area has evolved considerably, particularly under the influence of international pressure and the recommendations of the FATF (Financial Action Task Force). Swiss legislation is primarily structured around the Federal Act on Combating Money Laundering and Terrorist Financing (AMLA/LBA), as well as various provisions of the Swiss Criminal Code.
The Qualified Tax Offence: Link Between Taxation and Money Laundering
| Tax Offence | Predicate Offence to Money Laundering? | Conditions |
|---|---|---|
| Simple tax evasion (omission) | No | Art. 175 FDTA/LIFD: administrative offence only |
| Tax fraud (forged documents) <CHF 300,000 | No (in principle) | Criminal offence but threshold not reached |
| Qualified tax offence (tax fraud >CHF 300,000/year) | Yes (since 2016) | Art. 305bis SCC: predicate offence to money laundering |
| Tax fraud (VAT) | Yes | Cunning conduct aimed at deceiving the FTA VAT |
Obligations of Financial Intermediaries Under the AMLA
| Obligation | Content | AMLA References |
|---|---|---|
| Identification of the contracting party | Verify the client's identity upon opening the relationship | Art. 3 AMLA |
| Identification of the beneficial owner | Determine who effectively benefits from the assets | Art. 4 AMLA |
| Clarification of unusual transactions | Analyse the economic background of complex operations | Art. 6 AMLA |
| Documentation obligation | Keep documents for 10 years | Art. 7 AMLA |
| Report to MROS | Report money laundering suspicions (obligation, not optional) | Art. 9 AMLA |
| Blocking of assets | Freeze suspect assets upon MROS report | Art. 10 AMLA |
Swiss Legal Framework on Money Laundering
The Swiss anti-money laundering system rests on a rigorous set of legislative texts, the cornerstone of which is the Federal Act on Combating Money Laundering and Terrorist Financing (AMLA/LBA). This act, which entered into force in 1998 and is regularly updated, defines the due diligence obligations imposed on financial intermediaries.
Article 305bis of the Swiss Criminal Code specifically criminalises money laundering, defining it as the act aimed at obstructing the identification of the origin, discovery or confiscation of assets that one knows or must presume come from a crime or a qualified tax offence. Sanctions may reach up to five years of deprivation of liberty or a monetary penalty.
Politically Exposed Persons (PEPs)
Special attention is paid to politically exposed persons (PEPs). This category includes:
- Persons exercising leading public functions abroad (heads of state, ministers, senior magistrates)
- Persons exercising leading public functions in Switzerland at the national level
- Leaders of international organisations
- Close relatives and associates of these persons
Business relationships with PEPs require approval at a high management level and enhanced periodic review.
Tax Offences and Money Laundering: Recent Developments
Since 2016, the qualified tax offence constitutes a predicate offence to money laundering. This notion applies when the evaded taxes exceed CHF 300,000 per tax period. This legislative modification, consistent with FATF recommendations, has considerably expanded the scope of application of anti-money laundering legislation. Financial intermediaries must now be vigilant not only regarding funds from traditional criminal activities, but also regarding assets that could come from significant tax fraud.
Frequently Asked Questions About Money Laundering and Tax Implications
From what point is tax fraud considered a predicate offence to money laundering in Switzerland?
Since 2016, tax fraud (use of forged documents) resulting in a tax evasion exceeding CHF 300,000 per tax period constitutes a qualified tax offence, a predicate offence to money laundering under art. 305bis of the Swiss Criminal Code. Below this threshold, simple tax evasion does not constitute a predicate offence to money laundering under Swiss domestic law.
What are the obligations of Swiss banks regarding non-tax-compliant assets?
Banks must apply a risk-based approach: identify risks of qualified tax fraud, obtain tax compliance declarations, verify the plausibility of structures. If they suspect a qualified tax offence (>CHF 300,000 evaded), they have an obligation to report to MROS (Money Laundering Reporting Office Switzerland).
Has the automatic exchange of information (AEI) reduced the risks of tax money laundering?
Yes, significantly. The AEI, active since 2017 with more than 100 countries, has made it much more difficult to conceal undeclared assets abroad. Swiss banks automatically transmit account data to foreign tax authorities, reducing opportunities for international tax fraud that could constitute a predicate offence to money laundering.
Is a Swiss lawyer subject to the AMLA in anti-money laundering matters?
Lawyers are subject to the AMLA only when they act as financial intermediaries, i.e. when they manage assets, incorporate companies, or carry out real estate transactions for their clients. Purely judicial and legal advisory activities are not subject to the AMLA. Professional secrecy of the lawyer is protected in the context of their typical activity.