Switzerland: New Reporting, Audit and Record-Keeping Obligations regarding Cash Transactions for Shareholders and Companies 

The Financial Action Task Force, an inter-governmental body of experts, issued a list of recommendations in the fight against money laundering, terrorist financing and other threats to the integrity of the international financial system. Switzerland is implementing these recommendations through strict transparency regulations for legal entities and their beneficial owners effective July 1, 2015 and through audit and record-keeping obligations for merchants regarding cash transactions exceeding CHF 100,000 effective January 1, 2016. Unfortunately, many aspects of these new regulations are ambiguous, which will in turn raise innumerable questions.

New Due Diligence Obligations for Cash Transactions

The revised Anti-Money Laundering Act (AMLA) effective January 1, 2016 provides that merchants must comply with certain obligations regarding cash payments exceeding CHF 100,000. These obligations include the identification of the contracting party, the determination of the beneficial owner, as well as the obligation to keep records of the  received information. If the transaction appears to be unusual and there are indications of money laundering, a dedicated verification of the transaction must be performed (request of additional information from the contracting party regarding the background and purpose of the transaction, plausibility check of the received information and written documentation of the verification).

The identification of the contracting party requires the first and last name, date of birth and nationality (to be verified on the basis of an official identity card, e.g. driver’s licence). If the contracting parties are legal entities, their representatives are to be identified; the company and the company seat of the (represented) legal entity are to be recorded.

The identity of the beneficial owner is to be enquired of the contracting party . Should the contracting party confirm that it is in fact the beneficial owner of the cash, further inquiries are not required. If, however, it is doubtful that the received information is correct, the following information is required for natural persons: last name, first name, address, date of birth and nationality of the beneficial owner. In the case of a legal entity the person controlling such legal entity is to be identified as the beneficial owner, i.e. the natural person(s), who directly or indirectly, solely or in cooperation with third parties hold a minimum of 25% of the capital or votes in the contracting party or exercise(s) controlling influence through its/their shareholding(s) or otherwise in the contracting party. Each cash transaction exceeding CHF 100,000 is to be recorded in writing and the records are to be kept for 10 years.

The CHF 100,000 limit may appear to be relatively high in comparison to the 4th EU Anti-Money Laundering Directive, which requires cash payment verification for amounts that exceed EUR 10,000. However, this minimum amount includes a multitude of transactions across an array of industries and sectors. Jewelers, the construction business, real estate brokers, used car dealers and the art trade are expected to be affected most of all.

New Reporting and Record Keeping Obligations in Corporate Law

As of July 1, 2015, shareholders of Swiss Stock Corporations (AG) and Limited Liability Companies (GmbH) are subject to new reporting obligations and new record-keeping and record retention obligations apply to these companies. Exempt from this new regulation are listed companies, because they are already subject to disclosure obligations under the existing stock exchange rules and regulations.

The first new reporting obligation affects all bearer shareholders: Individuals, who acquire even just one bearer share, are required to notify the company within one month. The individuals must provide documentation of ownership of the share, as well as first and last name, or company name and company address, as applicable, of the shareholder (official personal identification in the case of natural persons, commercial register excerpt in the case of legal entities).

The other new reporting obligation affects acquirers of bearer shares, registered shares or shareholdings in GmbHs. Each individual, who solely or jointly in cooperation with a third party holds a minimum of 25% of the capital or votes in a company is required to report the beneficial owner. The report must include last name, first name and the address of the beneficial owner. Please note that the acquirer alone has an obligation to report the beneficial owner who in contrast has no such obligation. This may cause problems, whenever the acquirer has no knowledge of the actual beneficial owner.

Reporting obligation compliance is enforced by severe sanctions: An infringement of the reporting obligation results in the suspension of membership rights (to include the right to vote at shareholders' meetings) and the forfeiture of property rights (to include dividend rights) of the defaulting shareholder.

To ensure the transparency of ownership, the companies must maintain a list of the beneficial owners and if applicable, the company must also maintain a bearer share shareholder list, which contains the information required by the new law. The lists and the associated records are to be kept for 10 years after a person has been removed from the list or the cancellation of the registration of a company in the commercial registry.

Emanuel Dettwiler, Kellerhals Carrard