FINMA Publishes Guidance on Money Laundering Risk Analysis to Enhance Compliance

The Swiss Financial Market Supervisory Authority (FINMA) has taken a significant step in bolstering anti-money laundering (AML) measures by publishing comprehensive guidance on money laundering risk analysis. This move aims to enhance transparency regarding the regulator's observations and insights gained from supervisory practices in this critical area of financial regulation.

Over the course of on-site supervisory reviews, FINMA has consistently identified deficiencies in the realm of money laundering risk analysis. These findings have led to a thorough evaluation of money laundering risk assessments at more than thirty banks in the spring of 2023. The assessment revealed that numerous risk analyses fell short of meeting the regulatory requirements. Among the shortcomings detected were the absence of adequate definitions of money laundering risk tolerance, which involves setting limits to mitigate risks. Additionally, the examinations unveiled a lack of several structural elements necessary for an effective and robust risk analysis.

The money laundering risk analysis plays a pivotal role in the strategic management of banks and other financial intermediaries. It serves as a tool for identifying and mitigating money laundering risks while determining the relevant risk criteria for the financial institution's operations. Crucially, the risk analysis also outlines which money laundering risks fall outside the institution's risk tolerance.

By providing guidance on money laundering risk analysis, FINMA seeks to bolster the AML efforts of financial institutions within its jurisdiction. This move is in line with international efforts to combat money laundering and the financing of terrorism. Ensuring that banks and financial intermediaries have comprehensive and effective risk analysis processes is essential to safeguarding the integrity of the financial system and preventing illicit financial activities.

The publication of this guidance underscores FINMA's commitment to proactive regulatory oversight and continuous improvement in the field of AML. Financial institutions are encouraged to carefully review the guidance and make necessary adjustments to their money laundering risk analysis processes to align with FINMA's expectations. Compliance with these guidelines is expected to contribute to a stronger and more resilient financial sector in Switzerland, as well as enhanced international cooperation in combating financial crimes.