Act on the Transparency of Legal Entities

On 30 August 2023 the consultation (Vernehmlassung) was launched for the enactment of the new Transparency Act of Legal Entities (Transparency Act) together with important amendments of the Anti-Money Laundering Act (AMLA). The consultation period ended on 29 November 2023 and the Federal Council submitted the Dispatch to Parliament on 22 May 2024. The entry into force is expected in 2026.

Below follows an overview of the main aspects of the bill.

1. The creation of a federal register (“transparency register”) of beneficial owners of legal entities

• Companies such as companies limited by shares (Aktiengesellschaft, AG), partnerships limited by shares (Kommanditaktiengesellschaft) and limited liability companies (Gesellschaft mit beschränkter Haftung, GmbH) and other Swiss legal entities such as foundations (Stiftungen) and associations (Vereine) registered with the commercial register, as well as cooperatives (Genossenschaften) and collective investment schemes (SICAV, SICAF Kommanditgesellschaften für kollektive Kapitalanlagen) will be required to enter information on their beneficial owners with a federal register named transparency register.
• Not only Swiss legal entities but also foreign legal entities (i) with a Swiss branch, (ii) de facto managed from Switzerland or (iii) holding Swiss real estate are subject to the bill.
• Beneficial owners are individuals that control a legal entity and directly or indirectly, alone or in concert with third parties, hold at least 25% of the capital or voting rights or exert control. If no individual meets these criteria, the highest member of the executive body (oberstes Mitglied des leitenden Organs) is deemed to be the beneficial owner. A risk-based approach will be applied to the identification and verification of the beneficial ownership and a legal entity will have to assess the plausibility of the information received.
• The obligation to register beneficial owners lies with the legal entity and the responsibility by the highest member of the executive body (oberstes Mitglied des leitenden Organs). Furthermore, shareholders that alone or together with third parties fulfil the concept of beneficial owner have an obligation of reporting towards the legal entity.
• The register will not be public but will be accessible to authorities and persons that are bound by the AMLA.
• The notification to the registry can be made via the commercial registry if all beneficial owners are registered with the commercial registry. This will be the case for GmbHs and other legal entities such as AGs being SMEs where all beneficial owners are also directors and therefore registered with the commercial registry.

2. The extension of certain due diligence provisions under AMLA to “risky activities” conducted by advisors including attorneys

• Advisors, including legal advisors, attorneys and notaries, will mainly be subject to certain due diligence duties under AMLA if they contribute to the professional preparation or execution of deals or transactions related to the:
  • acquisition and disposal of real estate
  • setting-up/structuring or management/administration of a company, foundation or trust
  • organization of the funds of a company
  • acquisition or sale of a company
  • providing their premises as seat of a company, foundation or trust
  • trading as a shareholder for the account of another person.
• Advisors will have to comply with due diligence duties under AMLA such as the identification of the customer, the verification of the beneficial owner, the documentation duty, the verification of the object and purpose of the relevant deal or transaction and the assessment on the plausibility of such purpose and background against the corresponding risks. Furthermore, an advisor will be required to file a notification with the Money Laundering Reporting Office (MROS) in cases of suspicious activities of money laundering or terrorist financing.
• The activities within the frame of civil, criminal, administrative or arbitration proceedings have been carved-out of the duty of notification to MROS due to the protection of the attorney-client privilege, to the extent that the advisor conducts a transaction in the name or for the account of a client or the information is covered by art. 321 of the Swiss Criminal Code (professional confidentiality).
• The relevant amendments will be implemented in the AMLA instead of the Swiss Bar Regulations (Anwaltsgesetz) as was originally foreseen and supervision will be conducted by the self-regulation organisations (SROs) instead of the regional bar associations as suggested in the pre-draft of the bill.
• The already applicable provisions of the AMLA to attorneys or other advisors that qualify as financial intermediaries (for instance when they act as escrow agent under certain circumstances) will continue to apply. Advisors that are already subject to the full AMLA as financial intermediaries can in principle declare that they prefer to implement full AMLA for all their files and in such a case will not have to replicate the same duties as advisors. Otherwise, they will have to implement their due diligence duties as financial intermediaries and/or their due diligence duties as advisors, as required by the relevant client relationship.

3. Further measures are taken to achieve the international standards of the FATF, mainly covering:

• Lowering the threshold for cash payments not subject to AMLA in precious metals from CHF 100,000 to CHF 15,000
• Extension of AML duties of care to all cash payments in real estate transactions (eliminating the current threshold of CHF 100,000)
• Adoption by financial intermediaries subject to AMLA of organizational measures to prevent sanctions under embargo legislation from being breached or circumvented
• The revision of the sanction system of self-regulation organisations (SROs), by applying public law to penalties and fines imposed by SROs as covered by the pre-draft of the bill was rejected and may potentially be subject to a future revision of the law.