The Anti-Money Laundering Act of 1997

The problem of the parabanking sector

By the mid-1990s the banks were subject to three layers of anti-money-laundering rules: the due diligence agreement, the guidelines of the Federal Banking Commission and the criminal provisions of 1990 and 1994. The rest of the financial sector was subject only to criminal law. Independent asset managers, fiduciaries, money changers, lawyers acting as financial intermediaries, credit card companies and dealers in precious metals had to observe Article 305ter, but no authority checked whether they did. The Federal Council's dispatch of 17 June 1996 attempted to measure the size of this “parabanking sector”. It estimated that around 350 asset managers operated outside the regulated banking sector, alongside an unknown number of money changers and credit intermediaries. It also estimated that some 5,000 lawyers and between 4,000 and 5,000 fiduciaries were active at least partly in financial services.¹

These figures explained the political logic of the new law. The Lebanon Connection had shown that laundering networks preferred money changers and trading companies to banks, precisely because banks had begun to ask questions. Many of the independent asset managers, fiduciaries and lawyers concerned practised in Zurich, Geneva and Lugano, often in close cooperation with the banks, which held the assets while the intermediaries managed the client relationship. A regime that applied only to banks invited a displacement of risk into the unsupervised sector. The legislature therefore decided to extend due diligence duties to all financial intermediaries, whatever their legal form or profession.

The architecture of the Act

The Federal Act on Combating Money Laundering in the Financial Sector was adopted on 10 October 1997 and entered into force on 1 April 1998.² It is cited in the Classified Compilation as SR 955.0 and was later renamed to cover the financing of terrorism as well. The Act had three essential elements. It defined the circle of financial intermediaries subject to its duties. It laid down the due diligence obligations, including the identification of the contracting party and the beneficial owner, the duty to clarify unusual transactions and the duty to keep records. Finally, it created the duty to report suspicions and the corresponding duty to freeze the assets concerned.

The duty to report was the most visible change. Under Article 9 of the Act, a financial intermediary that knows or has reasonable grounds to suspect that assets involved in a business relationship are connected with money laundering, originate from a felony or are subject to the control of a criminal organisation must report immediately to the Money Laundering Reporting Office. The right to report under Article 305ter paragraph 2 of the Criminal Code continued to exist alongside this duty for cases below the threshold of a reasonable suspicion.³ Under the original Act, the intermediary had to freeze the reported assets for up to five days, which gave the prosecuting authorities time to decide on formal measures.⁴

The 1996 dispatch stated the principle on which the whole Act rested in one sentence: “Das Geldwäschereigesetz basiert auf dem Prinzip der Selbstregulierung”.⁵ Banks, insurers and securities dealers remained under their existing sectoral supervisors, which enforced the new duties through their licensing and supervisory powers. For the parabanking sector, the Act created a novel system. Financial intermediaries without a prudential supervisor could either join a self-regulatory organisation recognised by the federal authorities or submit directly to the supervision of a new federal body, the Control Authority for the Prevention of Money Laundering, which was attached to the Federal Finance Administration.

Self-regulatory organisations

The self-regulatory organisations were the institutional heirs of the 1977 banking agreement. Like the VSB, they rested on private law. Each organisation issued its own regulations, which specified the statutory due diligence duties for its members, and each monitored compliance through audits and could impose sanctions up to expulsion. The federal authority recognised the organisations and supervised them, without supervising their members directly. The system allowed professional associations to shape the application of the law to their own members' business, which ranged from the asset management of private clients to leasing and currency exchange.

The geography of the self-regulatory organisations reflected the structure of the Swiss financial sector. A list published by the Control Authority named eleven recognised organisations. Three of them had their seat in Zurich: the organisation of the Swiss Association of Asset Managers, the self-regulatory body of the Swiss Leasing Association and PolyReg. Geneva hosted ARIF and OAR-G. Zug hosted the VQF, Lugano the OAD FCT and Lucerne the organisation of the Swiss Fiduciary Association. Bern hosted the organisation of the lawyers' and notaries' associations as well as the in-house bodies of Swiss Post and the Federal Railways.⁶ By 2007, 6,293 financial intermediaries were affiliated to self-regulatory organisations, while 412 were directly supervised by the Control Authority.⁷

The comparison with Geneva is instructive. In both cities the self-regulatory organisations became an important part of the local financial infrastructure, with their own staff, audit networks and case law. Zurich's organisations were oriented towards independent asset managers and the leasing and consumer credit industries. Geneva's two organisations grew out of the local professions serving international private clients, whose particular structure the companion volume on Geneva describes.

The Money Laundering Reporting Office

The second new institution was the Money Laundering Reporting Office Switzerland, known by its French acronym MROS. It was established within the Federal Office of Police as a financial intelligence unit. It receives reports from financial intermediaries, analyses them and forwards cases with sufficient substance to the criminal prosecution authorities. The office began work with a handful of staff in 1998. Before the Act, financial intermediaries had filed only thirty to forty reports a year under the voluntary regime. In 1998 alone the new office received 160 reports concerning assets of more than 330 million francs.⁸

The growth since then illustrates how the reporting culture changed. In 2022 the office received 7,638 suspicious activity reports concerning 13,750 business relationships, with an estimated asset volume in the lower double-digit billions of francs. Around 90 per cent of reports came from banks, while the other financial intermediaries remained under-represented.⁹ After the introduction of the goAML information system in January 2020, the annual volume of reports almost quadrupled. In 2025 MROS received 21,087 suspicious activity reports, 39.3 per cent more than the 15,141 reports of 2024, and 91.3 per cent of them came from banks. The office then employed around 57 full-time equivalents.¹⁰ The detailed analysis of today's reporting system belongs to Part I of this book. For the historical argument it is enough to note that the reporting duty of 1997 created a permanent flow of information from the financial sector to the state, which the banking secrecy of 1934 had been designed to prevent.

From Control Authority to FINMA

The Control Authority remained a comparatively small federal office. Its independent existence ended with the reorganisation of Swiss financial market supervision. On 22 June 2007 the Federal Assembly adopted the Financial Market Supervision Act, which merged the Federal Banking Commission, the Federal Office of Private Insurance and the Control Authority into a single authority. The Swiss Financial Market Supervisory Authority, FINMA, began its operational activities on 1 January 2009.¹¹

The banking side had also developed. In June 2002 a working group of the Federal Banking Commission on know-your-customer rules proposed replacing the Commission's money laundering guidelines of 1998 with a formal ordinance based on the Anti-Money Laundering Act. The proposed ordinance introduced a risk-based approach under which different standards applied according to the risk of a business relationship. It required enhanced due diligence for politically exposed persons and consolidated monitoring of reputational risks across international financial groups. The detailed identification procedures were left to the VSB.¹² The emphasis on politically exposed persons was no accident. It was a direct result of the potentate funds cases, above all the Abacha case, which the next section describes.

Notes

1. Federal Council, Botschaft zum Geldwäschereigesetz of 17 June 1996, BBl 1996 III 1101 (above). ↩
2. PricewaterhouseCoopers AG, Bekämpfung der Geldwäscherei (above), for the date of entry into force; law.ch, LAWINFO, “Geldwäscherei / Geldwäschereigesetz – Gesetzliche Grundlagen”, https://law.ch/lawinfo/geldwaescherei-geldwaeschereigesetz/gesetzliche-grundlagen/, for the date of adoption. ↩
3. Federal Council, Botschaft zum Bundesgesetz zur Bekämpfung der Geldwäscherei im Finanzsektor of 17 June 1996, on the choice of a reporting duty for financial intermediaries and on the continued existence of the reporting right under Article 305ter para. 2 SCC introduced in 1994, https://www.finma.ch/FinmaArchiv/gwg/d/dokumentationen/gesetze_und_regulierung/bundesgesetzgebung/PDF/Botschaft_GwG_d.pdf. The current text of Article 9 AMLA differs following later revisions. ↩
4. Federal Council, Botschaft zum Geldwäschereigesetz of 17 June 1996 (above), stating that after at most five days the intermediary knows whether the assets blocked at the time of the report may be released. The provision was later amended. ↩
5. Federal Council, Botschaft zum Geldwäschereigesetz (above). ↩
6. Control Authority for the Prevention of Money Laundering, Liste der von der Kontrollstelle anerkannten Selbstregulierungsorganisationen, https://www.finma.ch/FinmaArchiv/gwg/d/themen/institute/pdf/srolistd.pdf. ↩
7. Control Authority for the Prevention of Money Laundering, “Zahlen und Fakten”, https://www.finma.ch/FinmaArchiv/gwg/d/dokumentationen/zahlen_und_fakten/index.php, with figures for 2005–2007. ↩
8. Anton Brönnimann (Head of MROS), “25 Jahre Geldwäschereigesetz im Rückblick”, Die Volkswirtschaft, 14 March 2023, https://dievolkswirtschaft.ch/de/2023/03/25-jahre-geldwaeschereigesetz-im-rueckblick/. ↩
9. Brönnimann, “25 Jahre Geldwäschereigesetz” (above). ↩
10. Money Laundering Reporting Office Switzerland (MROS), Jahresbericht 2025, May 2026, https://www.fedpol.admin.ch/dam/de/sd-web/05JKPvNkIrsY/jb-mros-2025-d.pdf. ↩
11. Control Authority for the Prevention of Money Laundering, “FINMA”, https://www.finma.ch/FinmaArchiv/gwg/d/themen/finma/index.php. ↩
12. Federal Banking Commission, Sorgfaltspflichten von Banken und Effektenhändlern bei Geldwäscherei, Terrorismusfinanzierung und Beziehungen zu politisch exponierten Personen, report of the KYC working group, June 2002, https://www.finma.ch/finmaarchiv/ebk/d/archiv/2002/pdf/neu090702-02d.pdf. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.