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Dari Podhur

1 December 2023

14 min

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Counsel

Table of contents

License for the financial services in Switzerland

A

About the CEO

A

About the compliance with anti-money-laundering rules

B

Direct and indirect regulation of the financial market institutions

B

Navigating financial services licensing in Switzerland

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.)

License for the financial
 services in Switzerland

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

Portfolio managers and trustees, now mandated to be licensed by FINMA, fall under the supervision of the Supervisory Organisation (SO). This supervisory body ensures compliance with regulatory standards and proper oversight of licensed entities. The new supervision structure enhances the regulatory environment, providing clear guidelines for portfolio managers and trustees to follow, thus promoting transparency and accountability in their operations

Types of supervision 
of financial market actors

Self Regulatory Organisations (SROs) continue to supervise Anti-Money-Laundering Duties of financial intermediaries. Those involved in credit transactions, payment services, trading financial instruments, investment advising, and securities management must be SRO members. This ensures adherence to anti-money laundering laws, and membership can be verified through a provided link

Receiving and processing the application
for membership/authorisation as financial intermediary

The functions of supervisory bodies include

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

In Switzerland exist 11 SROs, that are recognised by FINMA and act as controlling body for the financial intermediaries

Overview of FINMA-recognized
self-regulated organisations
in Switzerland

Criteria for financial
services license

The obtainment of the authorisation for para-banking services (usually simply called "financial services license") does not require
high results from the applicant. The main issues that play role are

The company's management

Client profile management

Capital and clients
are marketing tools

AML compliance

Cross-border risks calculation

Comprehensive application
document preparation

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

One crucial aspect for regulatory bodies when assessing applications is compliance with both national legislation and international treaties related to anti-money laundering and terrorism prevention. The Swiss Confederation adheres to numerous such treaties. The Anti-Money-Laundering Act (GwG) governs financial intermediaries to ensure
due diligence in financial transactions, combatting money laundering and terrorist financing. FINMA sets norms for controlling client transactions, onboarding procedures, audit frequency, and notification processes for suspected transactions

About the compliance with anti-money-laundering rules

MROS handles reports of suspicious activities involving clients and financial intermediaries, blocking funds and forwarding information to international anti-money laundering bodies. To comply with all legal requirements, financial intermediaries must have an independent AML officer to oversee AML procedures. In smaller companies, this officer often also manages client onboarding, risk management, and compliance. The AML officer
can be a company employee or an external service provider

Detailed CV with the previous jobs, experience, references from past employers

CEO requirements (one Swiss resident director required)

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

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

Assessing cross-border financial risks

The Swiss Confederation is not a member of the EU and the EU National Bank Directives do not have direct influence on the financial institutions and companies in Switzerland, but the on-boarding of the clients in the country other than Switzerland has to comply with the regulations of this country, and also take account of the legislation of the country of client's residence

The most obvious areas of such interference are the taxes and international sanctions. For example, the USA (tax obligations of the citizens without regard
on the residence), Germany (tax obligation of the natural persons-residents), South Sudan (international sanctions)

The elaboration of the on-boarding procedures for the financial intermediary can be outsourced to the law firm (in form of recommendations for the work-flow), or can be a task for the AML/Compliance Officer

Managing the client
 profiles and compliance

The compliance procedures include the control over the fulfilment of the imperative norms for the financial intermediary prescribed by the law, as well as the calculation of the additional criteria such as reputational and financial risks

Defining the risk scale for clients and making onboarding decisions based on these risks is crucial. Main risk categories include politically exposed persons (PEPs), their relatives, transactions with unclear fund sources, and individuals involved in criminal activities. Compliance duties can be managed by an employed AML Officer or an external compliance service provider. Goldblum and Partners prepare profiles for these roles for application to the SRO

The frequency of updating client profiles depends on the operation's risk level and supervisory audit rules for financial intermediaries. For example, companies involved with cryptocurrencies undergo audits every six months, where as traditional asset management companies are audited yearly. This ensures compliance and proper risk management tailored to the specific nature of the business

Costs for financial license submission

In addition to the costs of the application 
there are following official fees from the the regulator:

Application fee

Expedited application fee

First-year company fee

Total Cost: 2000-8000 CHF,
Excludes Regular Audits

Application processing timeline

Usually the application is examined during 4-12 weeks, depending on the risk level of the planned activities, number of employees, management and so on. It is not possible to define the timeline more precisely due to the specific needs of each applicant

This article does not constitute legal advice and does
not establish an attorney-client relationship. The article should be used for informational purposes only

Legal disclaimer

Our services 
and expertise

Preparing the application for the financial services license

Goldblum and Partners is an independent law firm (with offices
in Zug and Zürich), top-ranked by the international ratings in the category Banking and Finance since 2014. We are confident in the financial market regulation and have worthful portfolio of the clients from the field (banks and financial intermediary). We can assist you in the following ways:

Obtaining banking
 or FinTech license

Compliance

AML, KYC, on-boarding, client profile management as an external AML Officer

Escrow services

Goldblum and Partners, an SRO member and authorized Escrow Agent, offers high-quality legal, compliance, and escrow services to meet your needs

info@goldblum.ch

Contact us

Contact us directly or email us for assistance. We are here to help you move forward.

info@goldblum.ch

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Disclaimer: The information on this website is not intended to constitute legal advice or to create an attorney-client relationship. The information, documents, or forms provided here in are intended for general information purposes only and must not be regarded as legal advice. Laws change periodically; therefore, the information on this website may not be accurate. It is imperative that you seek legal counsel to ascertain your rights and obligations under the applicable law and based on your specific circumstances

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