Switzerland has recently moved to tighten its anti-money laundering (AML) framework by extending regulation to cover certain consultancy activities deemed high risk, and by establishing a federal register of beneficial owners to improve transparency. Parliament has adopted amendments to the Money Laundering Act (AMLA) designed to meet Financial Action Task Force (FATF) standards. The case reveals how previously lax areas in legal and consultancy services, and opaque ownership structures, can be exploited for laundering illicit funds, and how legal reform seeks to close those gaps.

What triggered the reform and case specifics

Switzerland’s AML reform was prompted by deficiencies identified by FATF and by domestic civil society regarding consultancy and legal services which were insufficiently regulated under the old AMLA. Under the previous rules many advisory services that present high risk of money laundering, such as forming or managing companies, trusts, foundations or acting as shareholder of record for others, were not clearly subject to AML due diligence obligations. Legal professions such as lawyers, notaries, trustees, fiduciaries had limits in what they were required to disclose or report. That created loopholes that could be exploited by criminals to move illicit money through legal vehicles or by hiding behind professional secrecy.

The Federal Council in May 2024 adopted a dispatch with proposed measures that include a federal register of beneficial owners and due diligence obligations for legal professions and high-risk consultancy activities. Parliament debated and modified the draft, notably narrowing the scope of consultancy obligations to only those consultancy activities with a concrete risk of money

aundering rather than broadly covering all advisory services. The House of Representatives approved the bill by 116 to 75. Among the contested points was how far legal advisers should be brought under AML obligations, and how strong penalties for non-compliance should be.

Parallel to that, the legal framework for beneficial ownership transparency has been revamped: legal entities under Swiss law and some foreign entities connected to Switzerland will be required to declare their ultimate beneficial owners in a federal register maintained by the justice and police department, not open to the public but accessible to authorities and financial intermediaries for due diligence. The register is aligned with revised FATF Recommendation 24 on beneficial ownership transparency.

Money laundering risks in advisory and ownership gaps

The case demonstrates several core AML risk vectors. First, professional advisers and consultants who form or manage legal entities, or provide addresses or premises as registered offices, are often the gatekeepers in creating opaque structures. When those professions are exempt or only lightly regulated under AML, criminals can create shell companies, trust or foundation structures, use nominee shareholders or directors, and obfuscate the identity of beneficial owners. Funds derived from corruption, fraud, or other predicate offences can be layered through such vehicles, transferred across jurisdictions, laundered through real estate, or invested in assets that retain value.

Second, the lack of a central beneficial ownership register meant that different registers, commercial and entity registers, fiduciary records, or legal documents had gaps — some owners were hidden, changes in ownership not recorded in a timely way, or trusts/foundations outside strict regulation could be misused. Without central verification, financial intermediaries had to rely on client-provided documentation, which could be forged or incomplete.

Third, enforcement and deterrence were weaker when AML obligations were not universal among advisory professions. Penalties under previous frameworks for failing to identify beneficial owners or failing to report suspicious transactions were sometimes insufficiently dissuasive, or had legal grey areas (professional secrecy concerns, limited obligations for lawyers in purely advisory roles).

How the reformed framework addresses laundering potential

The new legal regime in Switzerland addresses these laundering vectors in several ways:

• Scope of due diligence for consultancy: Consultancy activities that present a concrete risk of money laundering are now clearly brought under AML obligations. Such activities include forming companies or trusts, managing or administering them, acting as shareholder nominee, providing registered office addresses, real estate dealings etc. That means advisers doing those tasks must verify client identity, beneficial ownership, purpose and background of the transaction or service, keep records, implement internal controls, and report suspicious activities per the AMLA.
• Central beneficial ownership register: Legal entities under Swiss law, and certain foreign entities with strong Swiss connection (branches, real estate, central administration) must declare who ultimately controls them. The threshold is generally 25% ownership or voting rights, or comparable control. If no natural person meets that, management or highest controlling persons are recorded. The register is non-public but accessible for authorised purposes by authorities and financial intermediaries for due diligence.
• Alignment with FATF recommendations: The reforms are designed to meet FATF Recommendation 24 which requires countries to maintain a central register of beneficial ownership information, and to ensure transparency of legal persons. They also answer criticisms by FATF in previous mutual evaluations of Switzerland.
• Enhanced enforcement potential: Under the new rules there are stronger penalties for non-compliance, obligations for legal professionals in high-risk consultancy to report suspicions, and more clarity about when professional secrecy yields to public interest in fighting money laundering. Also administrative obligations and liability for legal entities and individuals failing to update or provide beneficial ownership information.

What risks remain after reform and compliance challenges

Even with the new legal structure, money laundering risk remains unless implementation is rigorous. Key residual risks include:

1. Threshold and risk definition narrowing: Because only consultancy activities that present a concrete risk are covered, some advisory services may still lie outside the scope. Defining what counts as “concrete risk” is subjective, and under-inclusion could leave exploitable gaps.
2. Non-public register: While the register of beneficial owners improves internal transparency, because it is not fully public, researchers, NGOs, journalists or banks in foreign jurisdictions may still face challenges verifying ownership. Also verification depends on data quality and timeliness.
3. Professional secrecy vs reporting obligations: Legal professions often insist on professional privilege or secrecy. Ensuring that legal advisers who are clients in high-risk consultancy roles do report or at least disclose sufficient information for AML compliance may face resistance or legal challenge.
4. Sanctions and deterrence adequacy: Penalties need to be sufficiently dissuasive. If fines or legal consequences are modest compared to gains from money laundering, deterrence will be weak. Ensuring supervisory capacity, proactive audits, and high quality suspicious transaction reporting (STR) is essential.
5. Cross-border enforcement and foreign entities: Many companies, trusts or other vehicles are international. Foreign entities with Swiss branches or properties are included, but enforcement across jurisdictions can be complex. Also, criminals may shift to jurisdictions with lower AML obligations.
6. Cultural and compliance costs: Legal professionals and consultants will need to invest in compliance training, risk assessment, better internal controls. Some firms may try to avoid high risk consultancy assignments, but others may pass on costs or adjust behavior in unanticipated ways.

What the case teaches about laundering mechanisms and AML strategy

This reform case provides a lens into how money laundering operations exploit legal advisory, shell structures, beneficial ownership opacity, and jurisdictions with professional secrecy or lightly regulated advisory services. The laundering process often follows a pattern: illicit funds originate from fraud, corruption, tax evasion or organised crime; properties, trusts or companies are set up; nominee shareholders, nominee directors or trusts obscure the ultimate owner; funds are moved through bank or financial intermediaries; assets are invested; then laundered or legalized.

The Swiss case shows that effective AML strategy must include:

• Regulating non-financial professions that occupy “legal-structuring” roles, not just banks and traditional financial intermediaries.
• Transparency of ownership, not just in theory but in fully operational registers with obligations and sanctions.
• Risk-based approach combined with clear definitions so that obligations are not too vague or easily bypassed.
• Balance between professional secrecy (a legitimate value in legal systems) and obligations to report or reveal ownership when AML risk is high.
• International coordination, including alignment with FATF, mutual evaluations, and cooperating with foreign authorities.

What this reform means for financial crime investigators and compliance officers

For those working in compliance or investigations this reform has several implications:

• They will need to update internal policies and procedures to reflect the expanded scope: new consultancy roles, additional due diligence obligations, beneficial owner verification via register.
• Internal compliance systems must adapt: onboarding, monitoring, record-keeping, training of staff especially in legal and advisory services.
• Suspicious transaction reporting will likely increase in cases involving shell companies, trusts, real estate and advisory services; quality of reports will matter: providing background, ownership, control etc.
• Audits and supervisory reviews will test whether firms properly interpret “concrete risk” thresholds and whether they have identified when advisory roles trigger AML obligations.
• Cross-border and client information requests will become more common; firms must ensure they can get accurate documents, updates, and deal with entities in other jurisdictions.

Learnings for AML policy globally from the Swiss case

Other jurisdictions can take lessons from Switzerland. Many countries share similar gaps: friendly jurisdictions where legal structure formation, trusts/foundations, nominee directors, real estate investments or advisory services are lightly regulated. Bringing those into AML scope, having central beneficial ownership registers, aligning with FATF standards, and ensuring penalties and enforcement matter are all strategies that can strengthen defences against money laundering.

Policymakers elsewhere should ensure that regulations do not leave advisory professionals outside AML regimes, that ownership registers are not purely internal or symbolic but with real verification and sanctions, and that legal privilege or profession secrecy is carefully carved to avoid abuse.

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Related Links

• Swiss Federal Council dispatch on strengthening anti-money laundering framework
• FATF country assessment for Switzerland
• FINMA risk analysis report on money laundering (2024)
• Proposed Swiss Federal Act on Transparency of Legal Entities and Identification of Beneficial Owners
• Switzerland’s legislation on AMLA (Anti-Money Laundering Act)

Other FinCrime Central Articles About Switzerland

• Swiss and French Authorities Target HSBC Over $300 Million Lebanese Funds Scandal
• Swiss Prosecutor Rocks Credit Suisse Acquittal in Landmark Money Laundering Appeal
• Swiss Morgan Stanley Unit Fined: Major Money Laundering Scandal Uncovered

Source: SwissInfo

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