“Regulation is driving consolidation”

“Regulation is driving consolidation”

Jürg Birri, Head of the Regulatory Competence Center Financial Services at KPMG Switzerland, discusses how the Swiss financial industry will be impacted by Automatic Exchange of Information (AEoI), the Federal Anti-Money Laundering Act (AMLA) and the Federal Financial Services Act (FinSA).

Partner, Head of Legal and Regulatory Competence Center / Global Head of Legal

KPMG Switzerland


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A tidal wave of regulations inundated the financial services industry in the wake of the financial crisis. Is this slowly receding?

No. Quite the opposite, if anything. The financial services industry will have to implement a wide range of regulatory requirements over the next few years as well. In fact, this is one of the major challenges facing financial services providers. They will not have the luxury of being able to focus on one single issue, such as the changes in money laundering legislation due to take effect from 1 January 2016, but will have to cope with a wide variety of new regulations at the same time.

It is also worth pointing out that many of the future regulations will have quite a significant impact on business processes (e.g. FIDLEG – the new Federal Financial Services Act) or erode advantages – like banking secrecy – enjoyed by Switzerland as a financial center over many years (e.g. AEOI – automatic exchange of information).

So what are the current major issues? (AEOI, AMLA – Anti-Money Laundering Act, FIDLEG)

All banks are currently busy amending their processes and systems to reflect the new money laundering provisions. The big deadline here is 1 January 2016, with the impact on institutions varying according to their actual business model. Depending on the institution concerned, the most important changes relate to identifying counterparties and establishing beneficial owners, or the fact that serious tax violations now qualify as predicate offences from a money laundering perspective.

Another major challenge for Switzerland as a financial center is the automatic exchange of information (AEOI). This will take effect in EU states, as well as Liechtenstein, from as early as 1 January 2016, but not until 1 January 2017 in Switzerland. The corresponding piece of transposition legislation is still being discussed within the Swiss National Council during the current fall session. 

By contrast, the FIDLEG regulations are still at a very early stage – at least from a Swiss perspective. To put it simply, the idea is to adapt for Switzerland the principles of customer care already established in Europe, as defined in MiFID and MiFID II. Given the tremendous importance of the European market for Swiss financial services providers and the desire to achieve equivalence with the EU in this area, a great deal of significance is being attached to these regulations.

What are the consequences for financial institutions and their customers?

As far as amendments to the Anti-Money Laundering Act are concerned, it is again becoming clear that supposedly minor regulatory amendments restricted to matters of form – such as establishing the beneficial owner during the customer acceptance process – and within a bank’s IT system may actually require significant amendments to be made.

For example, AEOI applies not only to all bank customers but also to all insurance company customers domiciled abroad for tax purposes. As a result, AEOI will mean that many processes and systems used by all financial services providers will need to be amended. Amended forms will be needed, for example, in order to open new accounts. For the moment, the most important thing is to communicate things clearly to customers to prevent them becoming uneasy and abandoning Switzerland as a financial center.

As far as FIDLEG is concerned, it is still a little early to talk about implementation issues, with the Swiss Federal Council not expected to make a statement before December. Having said this, institutions should already be thinking at a strategic level about which parts of their current business model might be affected by future regulations and to what extent.

Is Switzerland as a financial center ready for these changes?

Recent years have seen financial institutions develop their resources and expertise with a view to keeping pace with regulatory changes. These changes are associated with certain costs, however, which is causing financial institutions to focus even more closely on this area, as well as perpetuating the process of consolidation within Switzerland as a financial center.



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