New Swiss act will impose due-diligence rules on high-risk legal advisors

Thursday, 23 May 2024
Switzerland's Federal Council (the Council) has agreed to introduce compulsory due diligence for certain activities by legal professionals and establish a non-public federal register of beneficial owners.
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The draft Federal Act on the Transparency of Legal Entities and the Identification of Beneficial Owners (the Act) will bring legal advice carrying a high risk of money laundering – especially company structuring and real estate transactions – into the scope of anti-money laundering (AML) due-diligence rules.

It also requires companies and other legal entities in Switzerland to report beneficial ownership information to the Federal Department of Justice and Police, which already runs the commercial register of companies. Simplified registration procedures will be provided for associations, foundations, sole proprietorships and limited liability companies, which should already have reported their beneficial owners to the commercial register and will need little additional effort to comply with the new law, says the Council.

The Act, soon to be submitted to parliament, is based on proposals discussed by parliament in 2019, though data collection has been further simplified, coordination with AML legislation improved, and data protection strengthened compared to the original draft put out for consultation. The Council says its measures are in line with international standards and includes regulations taking into consideration lawyers' and notaries' duty of professional secrecy.

Based on feedback from a consultation held last October, the Council has decided that responsibility for supervising lawyers' compliance with the new due-diligence obligations should be monitored by self-regulatory organisations rather than by the regional bar associations.

The legislation also contains measures to prevent sanctions-busting. Cash payments over CHF15,000 can still be used in precious metals trading and for any amount in real estate business, but they will be subject to due-diligence obligations. The Act is not expected to come into force until the start of 2026 at the earliest.

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