License for the financial services

Constantly our law firm receives requests from our existing and potential clients regarding the financial services license in Switzerland. Such license is a complex issue that is connected with many aspects of the future business and processes. The reason for this is that building the company-provider of financial services is an intermediate stage on the way to bank opening. In this short article, I will tell you about the main nuances and issues in the process of obtaining.

There are two types of financial regulation in Switzerland. The Swiss financial market supervisory authority - FINMA – is a supervisory body that issues authorisations and controls provision of bank, fintech, insurance, financial intermediary services (FOREX, asset management, fiduciary services etc.). Part of such services, like for example, some financial intermediary services may require either direct (by FINMA) or indirect (by SRO) regulation.*

*Please, be aware that the legislation concerning financial markets is constantly changing due to the quick development of the industry.

After the new financial market laws (FinSA, FinIA) and ordinances, as well as changes to the existing legislation entered in force on 1 January 2020 in Switzerland, the regulation of financial markets has been updated accordingly. Part of financial intermediaries, like banks, fund managers, investment companies, insurance institution, security firms, payment systems etc. is subject to FINMA authorisation and supervision.

Although portfolio managers and trustees are now to be licensed by FINMA, their supervision is entitled to Supervisory Organisation (SO).

Self Regulatory Organisations still exist and supervise the fulfilment of Anti-Money-Laundering Duties by the rest of financial intermediaries, who on a professional basis accept or hold on deposit assets belonging to others or who assist in the investment or transfer of such assets. In particular persons who carry out credit transactions, provide services related to payment transactions, trade for their own account or for the account of others in banknotes and coins, money market instruments, foreign exchange, precious metals, commodities and securities and their derivatives; make investments as investment advisers; hold securities on deposit or manage securities, has to become member of SRO. You can easily check the membership in SRO using this link.

The functions of supervisory bodies include:
⁃ Receiving and processing the application for membership/authorisation as financial intermediary.
⁃ Checking that the documents provided conform with FINMA requirements.
⁃ Specification of how to interact with supervisory authority and controlling the fulfilment of the AML/Compliance legislation.
⁃ Regular audits of the regulated company depending on the risk level of the company's activities.
⁃ Conclusions, recommendations and control over the implementation of the recommendations or instructions after the audit.
⁃ Membership revocation and sanctioning in case of violations of the applicable norms and regulations.

As mentioned above, the regulatory body wants to know how the company will function.It is necessary to show the planned marketing activities, on-boarding procedures and qualification of the management and employees in the field of the planned financial activities.

The lawyers of Goldblum and Partners prepare the following detailed information and documents:

— detailed CV with the previous jobs, experience, references from past employers.
We recommend to give social media links, contact email and phone numbers. The relevance of the past experience to the planned activities of the company is very important.
— references from previous employers and motivation letter with description of relevant experience will be a benefit. This shows the professionalism of the manager.
— excerpts from the debt collection register and certificate of the criminal record.
— proof of the high education and post-graduate education in the relevant areas.
— copies of the publications in professional magazines.

This is not the exhaustive list and some positions may change depending on the planned activities and the person involved.

This is one of the most important points for the regulatory body while assessing the application.
In addition to the complex national legislation and regulations, the Swiss Confederation has signed and agreed to the number of international treaties related to the anti-money laundering and terrorism prevention sphere.

GwG (Geldwaschreigesetz, German. "Anti-Money-Laundering Act") applies to financial intermediaries and governs the combating of money laundering and terrorist financing. It ensures the exercise of due diligence in the conduct of financial transactions.

FINMA elaborates norms for control over the client's transactions, on-boarding procedures, frequency of the audits for the financial intermediaries and clients, process of notification about the suspected transactions.

MROS (Meldestelle für Geldwäscherei) receives information about the suspected activities of the clients (natural persons and legal entities), financial intermediaries, and acts in order to stop such transaction, for example by blocking the funds. In addition, it forwards the information to the international bodies related to anti-money laundering (FATF checks the fulfilment of FATCA etc.).

In order to comply with all requirements and fulfil legal obligations, the financial intermediary shall have the independent employee, that will control the AML procedures and their effectiveness in the company. In the small or mild companies, the same person is usually responsible for the on-boarding of the new clients, risk management and compliance rules.

The AML officer can be either employee of the company or the separate independent company, that provides External AML Officer according to the contract.

The documents and information list for the AML officer during the financial license application is usually the same as for the director of the company.