The due diligence duties

Identification of the contracting party

The first duty of every financial intermediary is to verify the identity of the contracting party on the basis of a document with evidential value when establishing a business relationship (Article 3 AMLA). For natural persons this means an official identity document. For legal entities it means an extract from the commercial register or an equivalent document, together with the identification of the persons who open the relationship on behalf of the entity. For occasional customers the duty arises only above certain thresholds, which the AMLO-FINMA sets at CHF 15,000 for cash transactions and lower amounts for money transmission.¹ The CDB 20 contains the detailed rules for banks, including the forms, certification requirements and the procedure for video and online identification. In Zurich practice the identification of a new client is rarely difficult in itself. The effort lies in the steps that follow, in the determination of the beneficial owner and the plausibility of the client’s profile.

The beneficial owner

Article 4 AMLA requires the financial intermediary to identify the beneficial owner of the assets with the care required by the circumstances. Since the revision in force on 1 January 2023 the law has required the intermediary to verify that identity, which goes beyond the earlier duty merely to establish it. The verification follows a risk-based approach and requires the intermediary to test the plausibility of the information with its own knowledge of the client, with public information and with other available data. For legal entities, internal documents such as the share register or the notifications of beneficial owners under company law are required. The new duty applied to new relationships from 1 January 2023 and to existing relationships when their data were next updated.²

The Swiss concept of the beneficial owner has two branches. In the case of assets, the beneficial owner is the person to whom the assets economically belong. The bank documents this person in the declaration known in practice as Form A. For operating companies, the relevant person is the controlling person, meaning the natural person who holds, directly or indirectly, at least 25 per cent of the capital or votes or otherwise controls the company. If no such person can be found, the most senior member of management takes that place. This declaration is known as Form K. Trusts and similar arrangements are recorded on Form T, which lists the settlor, the trustees, protectors, beneficiaries and other persons with control.³ Domiciliary companies, that is, companies without an operational business, are treated as transparent. The bank looks through them to the person to whom the assets belong. FINMA expects the financial intermediary to document the reasons for the use of a domiciliary company and the transaction pattern that is to be expected within the structure.⁴

The beneficial owner concept is the point at which the Swiss rules meet the private client practice described in Part H. A family foundation in Liechtenstein, a discretionary trust governed by Jersey law or a Panamanian holding company with bearer shares, all familiar instruments in Zurich’s wealth management, must be broken down to the natural persons who control or benefit from them. The main difficulty is factual, because the information comes from the client and the client’s advisers. For that reason the verification duty of 2023 and the federal register of 2026 are significant. They give the financial intermediary sources against which the client’s declaration can be checked.

Renewal and periodic updating

Article 5 AMLA requires the financial intermediary to repeat the identification of the contracting party or of the beneficial owner when doubts arise in the course of the relationship. The revision of 2021 added a periodic and event-independent duty. Since 1 January 2023 the intermediary must periodically check whether the client documentation is still up to date and update it where necessary. The frequency depends on the risk of the relationship. A relationship with normal risk may be reviewed at long intervals, while a high-risk relationship requires much more frequent reviews.⁵ In the large Zurich banks the periodic review has become an industrial process with dedicated teams and automated triggers. For smaller institutions it is a significant cost, because each review of an old relationship may reveal gaps in documents that were accepted decades ago.

Special clarifications and risk categories

Article 6 AMLA is the core of the risk-based approach. The financial intermediary must clarify the economic background and the purpose of a transaction or business relationship when it appears unusual, unless its legality is clear, or when there are indications that the assets originate from a felony or a qualified tax offence, are subject to the power of disposal of a criminal or terrorist organisation or serve the financing of terrorism. The intermediary must further clarify business relationships and transactions with increased risk. The AMLO-FINMA requires each intermediary to set criteria for such relationships, such as the domicile of the client, the nature of the business, the amount of assets, the complexity of the structure and the countries involved. Transactions are monitored by automated systems that generate alerts, which compliance officers must analyse promptly. FINMA found in 2023 that some institutions took around sixty days to carry out the first analysis of transaction alerts.⁶

Politically exposed persons (PEPs) form a special category. Article 2a AMLA distinguishes foreign PEPs, domestic PEPs and PEPs in international organisations, together with their family members and close associates. A business relationship with a foreign PEP or a person close to one always counts as a relationship with increased risk. For domestic and international PEPs the increased risk depends on additional risk factors. Relationships with PEPs require the approval of senior management at the outset and an annual review. The intermediary must clarify the origin of the assets and the business activities of the PEP in detail.⁷ Domestic PEPs cease to be treated as such eighteen months after leaving office. Foreign PEPs remain PEPs for as long as the risk persists.⁸

The PEP rules were among the most important lessons of the potentate funds cases. The Abacha funds, a large part of which lay in Geneva and Zurich, showed that a bank could accept the family of a head of state as clients without asking the obvious questions. Today no Zurich bank can take a senior foreign politician as a client without a documented source-of-wealth analysis approved at board or executive level. The Federal Act of 18 December 2015 on the Freezing and the Restitution of Illicit Assets held by Foreign Politically Exposed Persons adds the possibility of freezing and returning such assets outside criminal proceedings. The chapter on mutual legal assistance and asset recovery covers that Act.

Documentation and organisation

Article 7 AMLA requires the financial intermediary to document transactions and clarifications so that a third party with expert knowledge can form a reliable judgement on the transactions and business relationships and on compliance with the Act. The documents must be kept for at least ten years after the end of the business relationship or the completion of the transaction.⁹ Article 8 obliges the intermediary to take the organisational measures necessary to prevent money laundering and terrorist financing. It must train its staff, maintain internal directives and carry out controls. From October 2026 the same article also covers the prevention of breaches of coercive measures under the Embargo Act, which brings sanctions compliance expressly into the anti-money-laundering organisation.

The foundation of the organisation is the money laundering risk analysis, which each institution must prepare and update. In August 2023 FINMA published Guidance 05/2023, in which it reported that most of the more than thirty banks reviewed did not meet the basic requirements. In particular, many had not defined their money laundering risk tolerance, which would set the limits within which the business may operate. FINMA emphasised the responsibility of senior management for setting that tolerance.¹⁰ In June 2026 FINMA published supplementary Guidance 04/2026. It found that banks had made progress in defining their risk tolerance and that some institutions under the Financial Institutions Act were applying the earlier guidance by analogy. Deficiencies remained, for instance where the exclusion of certain countries, client segments, services or products did not match the business model, or where the risk tolerance did not match the institution’s actual operations.¹¹

Notes

1. PwC, Bekämpfung der Geldwäscherei (above), commentary on Articles 3 to 8 AMLA. ↩
2. Pestalozzi Attorneys at Law, Manu Ferro, “GwG-Revision: Verschärfte Sorgfaltspflichten für Finanzintermediäre per 1. Januar 2023”, 21 September 2022, https://pestalozzilaw.com/de/insights/aktuell/legal-insights/gwg-revision-verscharfte-sorgfaltspflichten-fur-finanzintermediare-1-januar-2023/. ↩
3. Swiss Bankers Association, model form “T – Declaration for trusts” (2020), https://swissbanking.ch/_Resources/Persistent/0/0/4/e/004ed510828a90a06c35dcb30e59e4d5571dd83f/Form_T_2020_EN.pdf, issued under Art. 41 CDB 20 and listing settlors, trustees, beneficiaries, protectors and other persons with control; Swiss Bankers Association, “Leading Cases der Aufsichtskommission VSB, 1. Halbjahr 2024”, https://www.swissbanking.ch/_Resources/Persistent/2/8/1/0/2810170b430252fad9466097179ef48960b7d9c5/Leading%20Cases%20der%20Aufsichtskommission%20VSB%201.%20Halbjahr%202024%20%281.%20Januar%20bis%2030.%20Juni%202024%29.pdf, on Form A for the beneficial owner and on the three-step cascade of Form K for controlling persons (25 per cent of capital or votes, other control, most senior managing officer). The 25 per cent threshold for controlling persons of operating legal entities appears in Art. 2a para. 3 AMLA, https://www.droit-bilingue.ch/de-fr/9/95/955.0-2a-6.html, and in Art. 2 lit. f AMLO-FINMA, https://www.droit-bilingue.ch/de-fr/9/95/955.033.0-2-5.html (AMLO-FINMA contains no Art. 2a). ↩
4. FINMA, “Money laundering supervision: focus on money laundering risk analysis and complex structures (2023)”, https://www.finma.ch/en/documentation/dossier/dossier-geldwaeschereibekaempfung/fokus-auf-geldwaeschereirisikoanalyse-und-komplexe-strukturen/. FINMA found that many institutions did not adequately document the reasons for the use of domiciliary companies under Article 9a AMLO-FINMA. ↩
5. Pestalozzi, “GwG-Revision” (above). The note suggests that the KYC documentation of standard relationships should be reviewed at least every seven to ten years. ↩
6. FINMA, “Money laundering supervision: focus on money laundering risk analysis and complex structures (2023)” (above). ↩
7. BDO, “Geldwäschereirisiken im Umgang mit politisch exponierten Personen”, https://www.bdo.ch/de-ch/publikationen/geldwaeschereirisiken-im-umgang-mit-politisch-exponierten-personen. The article also stresses that FINMA has taken enforcement action against institutions that failed to clarify the origin of PEP assets. ↩
8. Art. 2a para. 4 AMLA: “Inländische politisch exponierte Personen gelten 18 Monate nach Aufgabe der Funktion nicht mehr als politisch exponiert”, https://www.droit-bilingue.ch/de-fr/9/95/955.0-2a-6.html. ↩
9. PwC, Bekämpfung der Geldwäscherei (above), commentary on Article 7 AMLA. ↩
10. FINMA, “Money laundering supervision: focus on money laundering risk analysis and complex structures (2023)” (above). The guidance was published on 24 August 2023. ↩
11. FINMA, “FINMA publishes supplementary guidance on money laundering risk analysis”, media release, 4 June 2026, https://www.finma.ch/en/news/2026/06/20260604-mm-am-04-26/. FINMA describes the risk analysis as a key tool for the strategic management of a financial institution. ↩

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.