FINMA Circular 2011/1: Activity as a Financial Intermediary under the AML Act

Laupenstrasse 27, 3003 Bern
Tel. +41 (0)31 327 9100, Fax +41 (0)31 327 9101 www.finma.ch Circular 2011/1 Activity as a Financial Intermediary under the AML Act Explanations regarding the Anti-Money Laundering Ordinance (AMLO) Reference: FINMA-Circular 11/1 "Activity as a Financial Intermediary under the AML Act" Issued: 20 October 2010 Entry into force: 1 January 2011 Last amendment: 4 November 2020 [Amendments are marked with * and listed at the end of the document] Legal basis: FINMA Act Art. 7 para. 1 lit. b

Addressees
Bank Act
Insurance Supervision Act
Financial Institutions Act
Financial Market Infrastructure Act
Collective Investment Schemes Act
Anti-Money Laundering Act
Others
Banks
Financial Groups and Conglomerates
Other Intermediaries
Insurers
Insurance Groups and Conglomerates
Brokers
Asset Managers
Trustees
Managers of Collective Assets
Fund Management
Custody Securities Firms
Non-Custody Securities Firms
Trading Platforms
Central Counterparties
Central Securities Depositories
Transaction Registers
Payment Systems
Participants
SICAV
Small Collective Investment Schemes for Collective Capital Investment (KmG) SICAF Custody Banks Representatives of Foreign Collective Investment Schemes Other Intermediaries Self-Regulatory Organisations (SRO) SRO-Supervised Entities Audit Firms Rating Agencies X

Table of Contents
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I. Subject Matter and Legal Basis
II. General Scope of Art. 2 para. 3 AML Act
A. Concept of Activity as a Financial Intermediary (Art. 2 para. 1 lit. a AMLO) B. Non-Financial Intermediary Activities (Art. 2 para. 2 AMLO)
C. Territorial Scope (Art. 2 AMLO)
III. Credit Business (Art. 3 AMLO)
A. Covered Credit Business
B. Activities Not Considered Credit Business (Art. 3 AMLO)
IV. Payment Services (Art. 4 AMLO)
A. Execution of Payment Orders (Art. 4 para. 1 lit. a AMLO) B. Issuance of Payment Instruments and Operation of Payment Systems (Art. 4 para. 1 lit. b AMLO)
C. Money and Value Transfer (Art. 4 para. 1 lit. c and para. 2 AMLO)
V. Trading Activities (Art. 5 AMLO)
A. Trading in Banknotes and Coins (Art. 5 para. 1 lit. a and b AMLO) B. Trading in Commodities (Art. 5 para. 1 lit. c and d AMLO)
C. Bullion Trading (Art. 5 para. 1 lit. a and e AMLO)
D. Securities Trading (Art. 5 para. 2 AMLO)
E. Currency Exchange (Art. 5 para. 1 lit. a and 3 AMLO) F. Foreign Exchange Trading (Art. 5 para. 1 lit. a AMLO) G. Other Types of Trading
VI. Other Activities
A. Asset Management (Art. 6 para. 1 lit. a AMLO) B. Investment Advice (Art. 6 para. 1 lit. b AMLO)
C. Safekeeping of Securities (Art. 6 para. 1 lit. c AMLO)
D. Organ Activity for Seat Companies (Art. 6 para. 1 lit. d AMLO) E. Insurance Brokers F. Lawyers and Notaries Para 1-2 3-28.6 3-4 5-27 28-28.6 29-57 29-34 35-57 58-69 58-62 63-68 70-89 72-74 75-82 84-87 90-132 90-95 97-99 100-109 110-113 114-123

Table of Contents
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G. Financial Intermediary Activity in the Real Estate Sector
VII. State Action
VIII. Professional Nature
A. General Criteria (Art. 7 AMLO)
B. Related Persons (Art. 7 para. 4 and 5 AMLO)
C. Credit Business (Art. 8 AMLO)
D. Money and Value Transfer Business (Art. 9 AMLO) E. Trading Activities (Art. 10 AMLO) F. Exit from and Exclusion from an SRO (Art. 12 AMLO)
IX. Transitional Period
Para
124-132
133-141
142-153
142-147
149-150

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I. Subject Matter and Legal Basis
Art. 2 of the Anti-Money Laundering Act (AMLA; SR 955.0) determines the scope of the AMLA. In addition to the financial institutions supervised under special legislation mentioned in Art. 2 para. 2 AMLA, the AMLA also covers financial intermediaries who are not supervised under special legislation pursuant to Art. 2 para. 3 AMLA. Based on Art. 41 para. 1 AMLO, the Federal Council has specified the scope of Art. 2 para. 3 AMLA with the Anti-Money Laundering Ordinance (AMLO; SR 955.01). This circular reflects FINMA's practice regarding activities subject to the Anti-Money Laundering Act and shows how FINMA interprets the AMLA and the AMLO, and when it considers an activity to be professional financial intermediary activity. Explanatory examples are provided in italics. The circular follows the structure of the AMLO, whereby the provisions of the AMLO are generally not repeated.
II. General Scope of Art. 2 para. 3 AMLA
A. Concept of Activity as a Financial Intermediary (Art. 2 para. 1 lit. a AMLO) The Anti-Money Laundering Act refers to the companies and persons covered by it as "financial intermediaries" (Art. 2 para. 1 AMLA). According to Art. 2 para. 3 AMLA, financial intermediaries are persons who professionally accept or hold third-party assets or help to invest or transfer them. This provision lists in letters a–g some of the activities covered by the AMLA, such as credit business or payment services. This catalogue shows that the AMLA primarily covers activities in the financial sector (BBl 1996 III 1115). However, persons and companies that primarily provide services in other sectors may also be affected by the provisions of the Anti-Money Laundering Act if they additionally pursue financial intermediary activities. The individual activities covered by Art. 2 para. 3 AMLA are explained in more detail in sections III–VII. B. Non-Financial Intermediary Activities (Art. 2 para. 2 AMLO) Art. 2 para. 2 AMLO explicitly lists the following activities that are not qualified as financial intermediary activities:
a) Transport and storage of assets (Art. 2 para. 2 lit. a no. 1 AMLO) The purely physical transport, i.e., the conveyance of assets from one place to another, as well as the purely physical storage of assets are, with the exception of the safekeeping of securities (Art. 6 para. 1 lit. c AMLO), not relevant activities within the meaning of the AMLA. However, if the transporter performs other activities in connection with the transport that qualify as financial intermediary activities, their subjection to the law must be affirmed. For example, the transporter may have cash entrusted to them transferred to their own account before it is credited to the recipient's account. In doing so, the transporter gains control over the third-party cash and, in addition to transporting the money, provides a payment service. b) Collection activities (Art. 2 para. 2 lit. a no. 2 AMLO) In collection, the agent collects due claims on behalf of the creditor. The agent acts either as a direct representative of the creditor or appears in their own name vis-à-vis the debtor after having the claims assigned to them in trust by the creditor. The AMLO excludes collection activities from the scope of the AMLA because the debtor is not a contractual partner of the agent and their identification is excluded by the concept of the AMLA. If the agent maintains contractual relationships with both the creditor of the claim and the debtor, a collection activity may still be present. The decisive factor is on whose behalf the transfer or forwarding is made, which must be determined based on indicators. Typically, the service is compensated by the principal. A collection activity may also be present if the agent operates within a closed circle of goods or service recipients and cannot be regarded as an independent intermediary person. The agent's purpose is the smooth flow and simplification of payment to the goods supplier or service provider. A cooperative mediates business transactions between its members and goods suppliers and takes over payment services for goods delivered to its members (Federal Court judgment 2A.62/2007 of 30 November 2007). A franchisor offers its franchisees additional central processing of payment services for goods purchased from the goods supplier. c) Transfer of assets as an accessory ancillary service to a main service (Art. 2 para. 2 lit. a no. 3 AMLO) The following indicators cumulatively support qualifying the transfer of assets as an accessory ancillary service:

• It is generally an ancillary service embedded in a contractual relationship that is not attributable to the financial sector;
• The contractual party providing the main service also provides the ancillary service; 15
• This ancillary service is of subordinate importance in relation to the main service; 16
  this can generally be assumed if no additional remuneration is demanded for the ancillary service apart from cost-covering expenses;
• The ancillary service is closely related to the main service; providing the main service without providing the financial intermediary ancillary service would result in particular difficulties for the contractual parties.
  An accessory ancillary service is present, for example, when a retirement and nursing home pays for goods or services from third parties on behalf of its customers using a pre-funded depot established for this purpose. The execution of payment orders by accountants in addition to accounting services is generally not to be described as accessory. However, if a person or company offers services that cannot be qualified as an accessory ancillary service but represent a financial intermediary activity as an independent service, a duty to register arises if exercised professionally. d) Operation of Pillar 3a pension schemes by bank foundations or insurance companies (Art. 2 para. 2 lit. a no. 4 AMLO) (No explanations) 21 e) Provision of services within group companies (Art. 2 para. 2 lit. a no. 5 AMLO) Within the scope of the AMLA, a group is considered an economic unit of companies if one directly or indirectly holds more than half of the voting rights or capital in or controls the other in any other way. Thus, a group company that performs cash management or treasury functions within an industrial or commercial group is not a financial intermediary within the meaning of the AMLA. The regulation of Art. 2 para. 2 lit. a no. 5 AMLO applies analogously to structures where, instead of a legal person, a natural person stands at the top. f) Involvement of auxiliary persons (Art. 2 para. 2 lit. b AMLO) If the criteria of Art. 2 para. 2 lit. b no. 1–6 AMLO are met, the auxiliary persons are covered by the financial intermediary's license or SRO membership. The financial intermediary who engages the auxiliary person remains responsible for compliance with the due diligence obligations of the AMLA. In the field of money and value transfer, the auxiliary person may only act for one financial intermediary (so-called "exclusivity clause"; Art. 2 para. 2 lit. b no. 5 AMLO). With the exception of money or value transfer business, auxiliary persons may act for several financial intermediaries holding a license or SRO membership.
  C. Territorial Scope (Art. 2 AMLO)
  Repealed 28*
  A financial intermediary is active in Switzerland or from Switzerland within the meaning of Art. 2 para. 1 lit. a AMLO if 28.1*
• they have their domicile in Switzerland or are registered in the commercial register; or 28.2*
• they employ persons in Switzerland who permanently carry out or conclude financial intermediary transactions in Switzerland or from Switzerland on their behalf, or can legally obligate them to such (de facto branch office). This includes business offices of companies constituted under foreign law that have their head office abroad but pursue a license-required activity here without formally establishing a branch office (see ATF 130 II 351 E. 5.1 p. 362).
  28.3*
  De facto branch offices also include persons who permanently help the foreign financial intermediary to carry out essential components of the financial intermediary activity in Switzerland or from Switzerland, such as by receiving or handing over assets or by providing the financial intermediary service. 28.4* The territorial scope of the AMLA covers in particular the following situations:
  A foreign money transmitter uses a network of agents in Switzerland who receive or pay out funds in their name.
  A foreign company issues prepaid cards and distributes them through a sales outlet in Switzerland.
  A person concludes credit contracts with customers in Switzerland for a foreign company or receives repayments on their behalf based on a credit contract.
  28.5*
  The following situations are not within the territorial scope of the AMLA in particular: 28.6* A wealth manager active and licensed abroad is authorized by their customer to dispose of assets deposited in a Swiss bank account. A banknote dealer active and licensed abroad delivers banknotes to a customer in Switzerland.

A wealth manager active and licensed abroad offers financial intermediary services in Switzerland exclusively via the Internet or other electronic channels.
A foreign wealth manager temporarily comes to Switzerland to service their clients here.
III. Credit Business (Art. 3 AMLO)
A. Covered Credit Business a) Money loans
The provision of money to a borrower against their obligation to repay the received sum and pay interest is generally subject to the AMLA. Covered by the AMLA are thus mortgage loans, current account loans, bill loans, Lombard loans, long-term loans such as participating loans and subordinated loans, even if secured by pledge or other security. Pawnbrokers who grant loans against a pawn are therefore subject to the AMLA. b) Consumer loans According to the wording of the law, consumer loans within the meaning of the Consumer Credit Act (CCA; SR 221.214.1) are also subject to the AMLA. The explanations regarding accessory credit granting (para. 44 ff.) remain reserved. c) Trade financing Because the advance financing of a contractual party in the context of trade transactions can also be considered a credit, trade financing is generally subject to the law according to its wording. This term generally includes discount loans, assignment loans, and financing leasing, but also merchandise credit or sales financing. Financing leasing involves a leasing company, the lessor, as a third party in addition to the manufacturer – respectively supplier or dealer – and the lessee. This third party acts as the lender. The lessor makes the object available to the lessee for an irrevocable contract period, which approximately corresponds to the economic useful life of the leased object, and the sum of the lease payments approximately reaches the acquisition value of the object, including financing costs. As a rule, the lessee assumes all burdens and risks associated with the object, such as maintenance, insurance, taxes, or force majeure. Financing leasing is subject to the AMLA, whereby the duty to register falls on the lessor as the advancing party. However, neither operating leasing (para. 53) nor, as a rule, direct leasing (para. 52) is subject to the AMLA. Trade financing is not subject to the AMLA if it involves accessory credit granting within the meaning of Art. 3 lit. f AMLO (para. 44 ff.) or if the interest and amortization payments are not made by the contractual party (para. 55 ff.). B. Activities Not Considered Credit Business (Art. 3 AMLO) a) Borrowing (Art. 3 lit. a AMLO) The borrower is generally not subject to the AMLA. Legal entities and public law institutions that are permitted to accept deposits from the public pursuant to Art. 3 Banking Ordinance (BankV; SR 952.02), as well as funds for which they are fully liable, are also not subject to the AMLA. Associations and cooperatives are also exempt from the AMLA under the conditions of Art. 5 para. 2 lit. f BankV. The same applies to deposits from employees and retired employees with their employer (Art. 5 para. 2 lit. e BankV). As soon as other financial intermediary services within the meaning of the AMLA (e.g., banking active business, payment services, etc.) are provided in connection with the acceptance of deposits, a duty to register arises. b) Interest- and fee-free granting of credits
(Art. 3 lit. b AMLO) (No explanations) 37 c) Credit granting between company and shareholder (Art. 3 lit. c AMLO) Credit grants between a company and a shareholder are not subject to the AMLA if the shareholder directly or indirectly holds at least 10% of the capital and/or voting rights of the company. The focus is on the company capital (share capital including participation capital, stated capital). This practice applies to credit relationships with all legal entities where capital or voting participation is possible (joint-stock company, limited partnership limited by shares, limited liability company, credit relationships between the limited partner and the limited partnership). Credit grants between general partners and the general partnership, between general partners and the limited partnership are not subject to the AMLA. Credit granting between cooperatives and cooperative members as well as between associations and association members is not subject to the AMLA if the credit granting takes place within the ideal or common self-help purpose dedicated to the cooperative or association. Credit grants between a foundation and the beneficiary according to the foundation deed are not subject to the AMLA. Credit grants by non-profit and tax-exempt associations and foundations to third parties are also not subject to the AMLA within the framework of the non-profit association or foundation purpose. d) Credit granting between employer and employee (Art. 3 lit. d AMLO) The obligation to pay social security contributions within the meaning of Art. 3 lit. d AMLO for the employee must exist for the entire duration of the credit. As soon as this requirement ceases to exist, the lender becomes a financial intermediary. Because according to the constant practice of the Federal Court and the compensation funds, executive bodies are classified as dependent employees, the criterion of paying social security contributions from dependent employment also applies to executive bodies. e) Credit granting between related persons (Art. 3 lit. e AMLO) (No explanations) 43 f) Accessory credit granting (Art. 3 lit. f AMLO) The AMLO excludes accessory credit granting from the scope of the AMLA. This concerns cases where the credit granting is added to another legal transaction that is not attributable to the financial sector (e.g., a purchase of goods). The following indicators cumulatively support accessory credit granting:

• The purpose of the contractual relationship is the provision of a good or service that is not attributable to the financial sector (production and sale of capital goods, consumer goods, etc.).
• The goods seller or service provider ("provider of the main service") grants their contractual party a credit in addition. However, if the credit is granted to the contractual party by a group company of the main service provider, there is no accessory nature. Financial transactions of a group company for a third party are considered financial intermediary activities.
  For example, if the manufacturer and the lessor in a leasing relationship belong to the same group, the activity for a lessee outside the group is covered by the AMLA.
• The credit granting is substantively related to the main service.
• The credit granting is of subordinate importance in relation to the main service. An indication of this is given if the ratio between the gross revenue generated by the credit activity (interest income) and the company's gross revenue (or possibly segment gross revenue) is 10% or less;
• The funds for credit granting come from the general funds of the main service provider. However, if the contracts containing accessory credit granting are refinanced by analogous credit contracts with a third credit company, so that the main service provider only performs a formal function with regard to the credit granting, there is no accessory nature (e.g., back-to-back leasing).
  Accessory credit granting can be considered the deferral, the granting of a payment period, or the installment contract.
  Credit granting in direct leasing, where the manufacturer or dealer is themselves the lessor, is generally to be considered accessory. g) Operating Leasing (Art. 3 lit. g AMLO) Operating leasing, in contrast to financing leasing, has a relatively short duration of use of objects and/or is easily terminable. In operating leasing, the lessor generally bears the burdens and risks of the leased object. It is comparable to a rental relationship, which is why it is not seen as credit granting. h) Contingent obligations in favor of third parties (Art. 3 lit. h AMLO) Contingent obligations in favor of third parties include, for example, guarantees or warranties. The contractual party granting the contingent obligation (the guarantor or warranty provider) is consequently not subject to the AMLA. i) Trade financing if repayment is not made by the contractual party (Art. 3 lit. i AMLO) The money laundering risk in credit business is located at the money return flow (interest and amortization payment). A duty to register therefore only makes sense if the money return flow comes from the contractual party (ATF 2A.62/2007). In factoring, for example, the factor has a customer's claim from their business operations assigned to them. They pay the amount to the customer and collect the claim from the debtor when due. Here, the money return flow does not come from the advanced contractual party (customer), but from a third party (debtor). Also in forfaiting, which involves the purchase of clearly defined claims with waiver of any recourse against the assigning claim creditor, the money return flow is not made by the advanced contractual party, but by the debtor of the purchased claim.
  IV. Payment Services (Art. 4 AMLO)
  A. Execution of Payment Orders (Art. 4 para. 1 lit. a AMLO) A payment service is present in particular when the financial intermediary