I. Background

A. Rationale

1 Article 2a AMLA implements the recommendation of the Financial Action Task Force (FATF) formulated in 2012. The federal law was adopted on December 12, 2014, and has been in force since January 1, 2016. The article defines the term politically exposed person (hereinafter “PEP”) at the legislative level.

2 PEP was not a new concept at the time the law was passed. However, the term was not consistently defined in the regulations. Before its adoption, the term PEP was defined in Art. 2 para. 1 let. a no. 1 and 2 AMLO-FINMA and in Art. 10 para. 4 let. a and b of the Anti-Money Laundering Ordinance of the Federal Gaming Board (AMLO-FGB). The GwV-FINMA was aimed at financial intermediaries in accordance with Article 2 para. 2 AMLA and asset managers of collective assets, insurance institutions and securities dealers, as well as directly subordinated financial intermediaries (DSFIs) in accordance with Article 2 para. 3 AMLA. The AMLO-CFB was aimed at casinos in accordance with Article 2 para. 2 let. e AMLA. The definition did not apply to members of self-regulatory organizations to which neither GwV-FINMA nor GwV-ESBK applied. The regulation at the legislative level therefore enabled a binding and uniform regulation of the term for all financial intermediaries from 2016 onwards.

3 Only natural persons can be 3PEPs. Due to their position or function, they have influence within a state apparatus and have access to public funds or can award state contracts. A PEP therefore has an increased risk of misusing public funds for private gain or taking bribes and laundering the funds obtained in the national and international financial system. Family members of a PEP or their close associates may assist in hiding the funds or unlawfully profit from the PEP's influence and position. Because a PEP or a close associate may be the subject of increased media coverage, a business relationship with a PEP also exposes the financial intermediary to an increased reputational risk. To address and limit these risks, national and international institutions have defined standards for financial intermediaries for business relationships with PEPs. The measures are aimed at recognizing a business relationship with a PEP and preventing illicit funds from being laundered through the national or international financial system.

B. International development

4 Switzerland played a major role in the development of international standards with regard to PEPs. This development was driven not least by far-reaching events for the Swiss financial center in connection with PEPs. At the end of the 1990s, it was revealed that some of the assets of the late Nigerian military dictator Sani Abacha were held in Swiss bank accounts. In view of this, a meeting was held in Lausanne in November 2000 at Switzerland's initiative with representatives of the judicial and banking supervisory bodies of Canada, France, Germany, Switzerland and the United Kingdom. The outcome of this meeting was the “Supervisors' PEP Working Paper 2001”, which was published in November 2001. The document established the bases for identifying PEPs and the measures for limiting the associated risks.

C. The “Supervisors‘ PEP Working Paper 2001”

5 The introductory remarks of the “Supervisors’ PEP Working Paper 2001” pointed out the urgency of regulating this area. The abuse of the financial system through the laundering of the proceeds of corruption or the misappropriation of public funds for private purposes is a matter of concern for the regulatory authorities. The document was therefore intended to help the regulatory authorities to identify the clients of financial intermediaries who are particularly affected by the risks mentioned and to recommend measures to limit the associated risks. It defined a PEP as a natural person who is or has been entrusted with a prominent public function, such as heads of state, high-ranking politicians, officials, representatives of the judiciary and military or members in leading positions of state-owned enterprises, as well as important officials of a party. The definition explicitly included individuals at high levels, not at lower or middle levels, of the hierarchy. Family members of PEPs or persons close to PEPs were mentioned, but the assessment of the risks associated with this relationship to the PEP was not the same as for PEPs. In this context, the “Supervisors' PEP Working Paper 2001” used the subjunctive, i.e. business relationships with family members of PEPs or persons close to PEPs could pose the same reputational risk as a business relationship with the PEP itself. The definition explicitly included all legal forms controlled by a PEP or for which a PEP is the beneficial owner. Because the usual checks for opening and the measures for monitoring a business relationship do not correspond to the risks of a business relationship with a PEP, the “Supervisors' PEP Working Paper 2001” recommended special measures for checking and monitoring business relationships with PEPs. The decision to authorize the opening of a business relationship with a PEP should be made by a member of the management. In addition, the approval for the continuation of the business relationship should be renewed annually at the same hierarchical level. However, these measures only applied to business relationships with PEPs with a function in a country that was not the same as the domicile of the account-holding financial intermediary (“non-resident PEP”). Business relationships with a PEP with a function in a country that was identical to the domicile of the account-managing financial intermediary (“local PEPs”) were therefore explicitly excluded from the measures.

D. The “Wolfsberg AML Principles”

6 In October 2000, the Wolfsberg Group, an association of 11 global banks at the time, published the Wolfsberg AML Principles. The Wolfsberg Group is named after the location of its first meeting, Wolfsberg Castle in the canton of Thurgau in Switzerland. The organization develops and defines rules for “Know Your Customer” (KYC) and for directives to combat money laundering and terrorist financing. The guidelines have become the standard in the international financial industry. The “Wolfsberg AML Principles” of October 2000 were the association's first publication. In this document, the term “public official” was mentioned as a customer group for which special monitoring measures were to be taken due to the risks associated with this function. The functions associated with this term are almost identical to those of the “Supervisors' PEP Working Paper 2001”. In contrast to the “Supervisors' PEP Working Paper 2001”, however, the definition also included family members of a “public official” or persons close to them. The definition in the “Wolfsberg AML Principles” made no distinction as to whether the business relationship involved a “public official” in the home country or abroad. The term “PEP”, which was used for the first time in the aforementioned “Supervisors' PEP Working Paper 2001”, was to become established, however. In the guidelines on the subject published in the following years, the Wolfsberg Group also used the term PEP. In 2003, the “Guidance on Politically Exposed Persons (PEP)” and in 2008 the “Frequently Asked Questions (FAQ) on Politically Exposed Persons (PEP)” were published. Both publications were replaced in 2017 by the “Wolfsberg Group PEP Guidance”.

E. The “Customer Due Diligence for Banks”

7One month before the publication of the “Supervisors' PEP Working Paper 2001”, the working group of the Basel Committee on Banking Supervision and representatives of the Association of Offshore Centers had published the “Customer Due Diligence for Banks”. The document published in October 2001 also contained a definition of PEP, which already included the functions for PEP mentioned in the “Supervisors' PEP Working Paper 2001”. However, it included “persons or companies apparently associated with a PEP”. The definition contained therein was supplemented with a reference to the risks associated with business relationships with PEPs, especially those from countries where corruption is widespread.

F. The United Nations Convention Against Corruption

8In 2003, the United Nations Convention against Corruption (UNCAC) was adopted in New York. Switzerland acceded to the UNCAC in September 2009. With the agreement, Switzerland is committed to fighting corruption. In this sense, Art. 52 para. 1 stipulates that Switzerland requires financial institutions to “conduct enhanced due diligence on accounts requested or maintained by or for persons who are or have been entrusted with prominent public functions and their family members and close associates”. The Convention does not define PEP. Rather, it addresses corruption by persons who exercise a public office in general terms. Consequently, there is a close connection to the topic of PEPs.

G. The 2003 FATF Recommendations

9 The most significant initiative on the topic of PEPs came from the Financial Action Task Force (FATF). The FATF was founded in 1989 by the leading industrial nations of the time, Germany, France, Italy, Japan, Canada, the United Kingdom and the United States. The FATF sets out rules for combating money laundering, terrorist financing and the financing of weapons of mass destruction, which it publishes in the form of recommendations and continuously updates. It regularly monitors compliance with its rules in the member states and publishes the results. The FATF currently has around 40 member states. More than 200 countries and jurisdictions have now committed to implementing the FATF rules.

10 Since 1990, the FATF has published its recommendations for combating money laundering. In October 2001, the FATF added further explanations or guidelines to combat terrorist financing. Due to the constantly changing threats, the FATF has continuously updated its recommendations ever since. The Forty Recommendations published in 2003 contained a definition of PEP with mostly already known elements. The examples of a PEP-relevant function listed in the definition were the same as those mentioned in the “Supervisors' PEP Working Paper 2001” of October 2001. The restriction from the paper of the same name, that a PEP is exclusively a person at a high, and not medium or low, level of the hierarchy, was adopted in the definition. The FATF's definition was limited to natural persons and their close associates who perform a relevant function abroad. In view of the known risks associated with business relationships with PEPs or close associates of PEPs, the FATF recommended that members of senior management should authorize the opening of such business relationships. In contrast to the “Supervisors' PEP Working Paper 2001”, the FATF did not distinguish between a business relationship with a natural person who is close to a PEP for family or other reasons and a business relationship with the PEP himself when assessing reputational risks. Business relationships with persons close to PEPs therefore entail the same reputational risks as a business relationship with the PEP himself.

H. The 2012 FATF recommendation: PEPs within domestic public life and PEPs within international organizations

11 In the explanatory notes to the recommendations published in 2003, the FATF advised that the PEP term and the associated measures should also be extended to a PEP with a function within domestic public life. In the updated 40 Recommendations of February 2012, the FATF extended the term to include a domestic PEP, i.e. a natural person who is entrusted with a prominent public function at domestic level. This includes heads of state, high-ranking politicians, officials, representatives of the judiciary and military or members in leading positions of state-owned enterprises, as well as important officials of a party. A domestic PEP differs from a foreign PEP in terms of the country that has granted the function, taking into account the domicile of the financial intermediary with whom the PEP has a business relationship. If the same PEP has a bank managing his/her account abroad, then the bank in question regards the PEP as foreign. Both the PEP abroad and the PEP in the home country are functions of a higher and not middle or lower hierarchy level. In this recommendation, the FATF also designated for the first time a person who holds a leading position in an international organization as a PEP. In the glossary, the FATF defined international organizations as an entity that exists by virtue of an intergovernmental agreement. Their leading functions, such as persons with the rank of director, deputy director or member of the supervisory board or similar management functions, meet the criteria for this new category. The list of functions shows that, as with foreign PEPs, only functions at the top hierarchical level of the organization qualify as PEPs. The FATF justified the broadening of the term by referring to Article 52 of the United Nations Convention against Corruption (UNCAC) of 2003. The convention is generally aimed at corruption of persons who hold public office. In the PEP guidelines issued in 2013, the FATF made it clear that the definition of PEP should be the same as that in Art. 52 UNCAC.

12 The guidelines included definitions of foreign PEPs, domestic PEPs, natural persons holding certain leading positions in international organizations, as well as a list of characteristics of persons who are recognizably close to a PEP for family or other reasons. Depending on the cultural background, the group of persons who fulfill this criterion may extend beyond persons who are directly related to a PEP (e.g. parents, siblings, partners and children) and may also include, for example, distant relatives (e.g. cousins). However, a person may also be close to a PEP for other reasons. For example, on the basis of a partnership (e.g. romantic relationship) or business relationship (e.g. joint ownership of an operating company). The decisive factor for the assessment is the risk that the close person of a PEP can abuse their relationship with the PEP to help the PEP hide illicitly acquired funds from corruption or to profit from them themselves.

I. The term PEP in the European Union

13 The Third EU Money Laundering Directive from 2005 included a definition of PEP and specified measures for dealing with business relationships with PEP. PEPs are persons who “are or have been entrusted with prominent public functions, and immediate family members, or persons known to be close associates”. The terms were defined more precisely in the European Commission's Directive 2006/70/EC of August 1, 2006. This made it clear that, as a rule, only public offices at the national level are considered “important”, although public offices whose “political exposure” is identical to a similar function at the national level may also be “important”. Article 2 of the directive contained a list of functions whose holders are to be qualified as PEPs. These included, for example, heads of state, heads of government, ministers, deputy ministers and state secretaries, but also “members of supreme courts whose decisions are not subject to further appeal in exceptional circumstances”. The provisions explicitly excluded middle or lower-level functions from the PEP definition. The policy also defined who was included under the term “immediate family members”. Parents, spouses or partners were mentioned. A “known associate” was a person who, for example, shared beneficial ownership of a legal entity with a PEP. The addition of the word 'known' indicates that the person's relationship to a PEP must be publicly known. The directive explicitly states that 'active inquiry' is not required. Finally, an end to the PEP status was determined by the requirement that a PEP must be considered politically exposed for at least one year after giving up the relevant function. The Fourth Anti-Money Laundering Directive, adopted in 2015, aligned European anti-money laundering and anti-terrorist financing rules with the 2012 FATF recommendations. The requirements of the European Commission's PEP Directive 2006/70/EC of August 1, 2006, were adopted, but were supplemented by “directors, deputy directors and members of the management body or equivalent function in an international organization”. The EU's fifth anti-money laundering directive was adopted on May 30, 2018. Article 20a of the directive requires the member states and the Commission itself to publish lists specifying the individual functions that are considered “important public functions” according to the respective national requirements and those of the Commission, and whose holders qualify as a PEP. The member states should also require national organizations that have their registered office in the territory of the respective member state to maintain lists of equivalent functions. The Commission, member states and international organizations in the territory of a member state are obliged to keep the lists up to date and to make them public. The Commission complied with the regulation by publishing the list at the EU level in May 2022. In November 2023, the EU member states published the lists of the most important public offices in the respective country.

J. The PEP term in Switzerland

14 In Switzerland, the Swiss Federal Banking Commission (SFBC) already expressed its expectation in 1986, in the aftermath of the Marcos case, that business relationships with politically exposed persons could only be opened with the approval of the most senior management. The SFBC set out its expectations in greater detail in Circular SFBC-RS 98/1, which came into force on July 1, 1998. In it, the SFBC granted the executive board “sole authority” to approve business relationships with politically exposed persons and the duty to “regularly review” such business relationships. The definition of PEP in the circular was extended to persons “who have significant public functions for a foreign state or persons who are recognizably close to such officials”. When the Anti-Money Laundering Act (AMLA) came into force on April 1, 1998, the supervisory authorities were able to define the due diligence requirements for the financial intermediaries under their supervision by means of Art. 16 AMLA. The resulting AMLO-SFBC, which entered into force on July 1, 2003, contained a definition of PEP that was limited to persons in prominent public positions abroad and persons close to them. This regulation remained in force until AMLA Art. 2a entered into force on January 1, 2016.

II. Elements of the PEP concept

15 Before the introduction of Art. 2a AMLA, the term PEP was defined in Art. 2 para. 1 let. a no. 1 and 2 of the old AMLO-FINMA and Art. 10 para. 4 let. a and b of the old AMLO-SFBC. The definition included foreign PEPs, i.e. persons who, due to their function abroad, are to be qualified as PEPs. The new provision also covered domestic PEPs and natural persons in leading positions in intergovernmental organizations and international sports federations.

16 A PEP is exclusively a natural person. The definitions of PEP in the aGwV-FINMA and aGwV-ESBK also included legal entities. In practice, however, this change has no significant consequences because the financial intermediary is obliged under Art. 4 AMLA to identify and verify the beneficial owner of a contracting party, who may also be a legal entity. If the verification of the beneficial owner of a contracting party shows that it is a PEP, enhanced due diligence must be applied to the business relationships.

17 The amendment has the consequence that state-owned enterprises are not PEPs. However, by applying a risk-based approach, a financial intermediary may still come to the conclusion that there are increased risks in the case of such an enterprise. The deciding factor here may be that a natural person plays a role in the company's controlling bodies that is not explained by the company's function or mandate. This may be the case, for example, if the person is also a member of the ruling family of the country in question in addition to his or her role in the state-owned enterprise. Under these circumstances, there may be an increased risk of corruption because independent higher control mechanisms are lacking. Furthermore, information on a country's corruption risk, any substantial risk indications found in public sources with regard to the state-owned enterprise (e.g. business activities in a high-risk sector such as armaments) may also be relevant for the assessment.

18 Art. 2a AMLA contains vague legal terms such as “leading public function”, “national level”, “supreme bodies of state-owned companies of national importance” or “recognizably close”. This makes it impossible to derive a list of functions that correspond to PEPs within the meaning of Art. 2a AMLA. In most cases, therefore, a comprehensive assessment based on the available information is required. This is even the case when lists or databases from private providers are used. Such lists should be understood as merely a relevant piece of information to be checked. The information they contain may be out of date or the sources cited may no longer be available on the internet at the time of the assessment. It may also be that the provider applies its own criteria for PEPs that are not identical to those in Art. 2a AMLA. Finally, lists from private providers or databases cannot show all possible indications of a PEP connection. For example, information on known close associates is not always publicly available. For this reason, it is essential that the financial intermediary contacts the contracting partner directly in order to obtain relevant information for assessing whether there is a connection to a PEP. When applying the assessment, it is advisable to adopt a conservative approach, i.e. the financial intermediary is advised to classify as a PEP anyone who could fulfill the attributes.

19 The PEP concept is a formalistic approach. If the contracting party, the controlling person, the beneficial owner of the assets or the authorized person is a PEP according to Art. 2a AMLA, the business relationship according to Art. 13 para. 5 AMLO-FINMA entails increased risks and must be treated as risky. The legal requirements must be adhered to. However, to reduce the workload, the specific implementation of the audit measures can be risk-based, for example, taking into account the country risk, the risk of the function and the services offered.

III. PEP abroad

20A foreign PEP is a natural person who is or was active in a leading public function abroad. This is in contrast to a domestic PEP, who has or has had a corresponding function in the home country. The domicile of the natural person is not decisive for this, but rather the country that has assigned the relevant function. The relevant factor for the distinction is whether the financial intermediary maintaining the account that has to carry out the assessment is domiciled in the country that has assigned the relevant function to the PEP. For example, a person domiciled in Switzerland may qualify as a foreign PEP because they have accepted or held a mandate abroad. By contrast, a financial intermediary in Switzerland will classify a natural person who is a PEP because of a mandate in Switzerland, for example, as a domestic PEP. A financial intermediary abroad, on the other hand, will treat the same person as a foreign PEP regardless of their domicile.

A. A leading public function at the national level

21 A “public” function is one that, by virtue of the mandate, gives the holder access to state resources or a say in the allocation of such resources. The function may or may not be exercised by virtue of an election, and it need not be a political function. Accordingly, the article refers not only to politicians but also to officials in the administration, judiciary and military, or the governing bodies of state-owned enterprises of national importance. What is decisive for the risk assessment is the potential access to state resources. High-ranking officials of political parties at the national level are exceptions under certain circumstances, but they are also mentioned. For example, secretaries general may also be employed by an organization under private law and therefore have no access to state resources.

22 The attribute “leading” refers to a function at the top and not at the middle or bottom of an organization's hierarchy, in line with the FATF recommendation. This interpretation is underscored by the listed functions in Art. 2a para. 1 AMLA, which emphasize a higher hierarchical level. The latter is particularly evident in the list of functions of heads of state and government. Persons in these functions are at high risk of corruption because they often have extensive access to state resources and/or influence due to their position and power. The assessment of whether a function meets the criteria of Art. 2a para. 1 let. a AMLA must therefore be made in this context. In doing so, other factors may also be taken into account, such as an assessment of the political structure and legal system of the country, the function itself, an assessment of the country's susceptibility to corruption, the remuneration of the function and its significance in the awarding of public contracts. The assessment must also be made in the knowledge that the holder of such functions is in the public spotlight and therefore also represents a reputational risk.

23 In line with the FATF recommendation, to qualify as a foreign PEP, the function in question must be at the highest hierarchical level at “national level”. This requirement takes into account the fact that senior positions at national level generally have no supervisory organization above them, which is why these positions are exposed to a high risk of corruption. In its message concerning the implementation of the FATF recommendations, however, the Federal Council pointed out that the financial intermediary may also qualify a function at the sub-national level as a foreign or domestic PEP on the basis of self-developed risk criteria. In its guideline, the FATF also explains that, depending on the structure of the state, the significance of the function and taking into account the factors already mentioned, a function at the sub-national level can also be a PEP. In this sense, for example, a natural person who has or had the function of mayor of a larger metropolis abroad or who was or is the governor of a province of a country can also qualify as a PEP. An assessment of these functions as PEP can be justified by the number of inhabitants of a city, the associated responsibility and budget authority, as well as the political structure of the respective country, for example if the function of a governor of a province has extensive powers.

24 Because the FATF did not mention the deputy of a leading public function in its definition of foreign and domestic PEPs, this function is not listed in the article. However, in its message on the implementation of the FATF recommendations, the Federal Council pointed out that a deputy of a function can also qualify as a foreign PEP on the basis of one or more risk criteria. In practice, however, the financial intermediary is free to qualify a deputy of a PEP-relevant function as a foreign PEP even without risk criteria, especially since it is obvious that this function, whose authorizations must be designed in such a way that it can act as a deputy, represents the same risk as the PEP itself.

B. Governing bodies of state-owned enterprises of national importance

25Natural persons who perform or have performed a function on the “governing body” of a “state-owned enterprise of national importance” abroad qualify as foreign PEPs. “State-owned enterprises” are entities that are majority-owned or controlled by the state and often, but not necessarily, produce services or products and thus pursue commercial objectives. This may also include a nationally financed organization that fulfills a public function. Based on this understanding, it may include, for example, a state-owned university at the national level, a national regulatory authority for a specific industry, a state-owned pension and survivors' insurance for a country, or independent state-owned organizations with a specific purpose (e.g. economic development of a country). In practice, the addition of “of national importance” is often understood to mean that the state-owned enterprise or organization provides a service in a sector that is strategically important for the country (e.g. infrastructure). However, this addition can also be understood as follows: because a leading public function at the national level qualifies as a foreign PEP, the addition attempts to reflect this attribute at the level of “state-owned enterprises” as well. The attribute “of national importance” already existed in Art. 2 para. 1 let. a aGwV-FINMA and is probably a national peculiarity. The “Supervisors' PEP Working Paper 2001” of November 2001, which was prepared by representatives of banking supervisory authorities from major financial centers, including Switzerland, and which, as is well known, laid the foundation for the PEP principles, did not include the addition of “nationally significant” to “state-owned enterprises”. The FATF recommendation designates persons in the supreme bodies of state-owned corporations as PEPs and does not contain any similar addition. It cannot therefore be proven beyond doubt from the preparatory work mentioned that “state-owned companies of national importance” within the meaning of Art. 2a para. 1 let. a AMLA refers only to companies or organizations that produce goods or services that are strategically important to a country. In practice, however, it often turns out that organizations and companies maintained at the national level actually offer such goods or services. These do not necessarily have to be active in a sector that is strategically relevant for a country in the conventional sense, but may also be state organizations or companies that, for example, manage a country's cultural heritage (e.g. archaeological finds). The latter can also be justified by the fact that such functions in countries with a high risk of corruption can also entail the corresponding risks. The application of a risk-based approach when assessing the term “of national importance” is therefore not excluded. It is also recommended for a subsidiary of a state-owned company that has its own governing body. Decisive criteria may include, among other things, the legal basis, the size of the company and the significance of the function for the economic development of a country or, equally, the strategic importance for a country of the products or services provided by the company. “Top management” refers to functions at the highest level of an organization's hierarchy, the structure and designation of which may vary from country to country and industry to industry. This is probably why the FATF only refers to ‘senior executives’ without defining the term. In practice, this refers to those functions that are responsible for the supervision and management of the respective organization.

26 A country's rule of law situation may also be a deciding factor in the assessment. If a country's democratic institutions are weak, individuals who control a country's significant economic resources can have a great deal of influence on the country's politics and economy. Such individuals do not have to have a leading public function within the meaning of Art. 2a AMLA. However, they may enjoy a special status due to their position that gives them easier access to government contracts. These individuals may also have a large network within the political and economic elite of a country. There is therefore a risk of corruption. In line with a risk-based approach, such individuals may also be designated as PEPs for the reasons mentioned.

IV. Domestic PEP

27 The FATF uses the same terms for the definition of foreign and domestic PEPs, which ensures that a function that qualifies as a domestic PEP domestically also fulfills the criterion for a foreign PEP abroad. Article 2a para. 1 let. b AMLA is therefore similarly formulated, but adapted to the Swiss situation. For example, the functions such as “heads of state and government and high-ranking politicians” mentioned in Art. 2a para. 1 let. a AMLA are missing from the article when listing the functions of domestic PEPs. Domestic PEPs are natural persons who are or have been active in leading public functions at the national level in politics, administration, the military and the judiciary. As with foreign PEPs, the specific functions cannot be clearly assigned on the basis of this information. It is probably for this reason that the functions that are meant are listed in the message on the implementation of the FATF recommendations. These include federal councillors, the federal chancellor, national and state councillors, directors of offices and secretaries general of the federal administration, the Federal Attorney, federal prosecutors, federal judges, senior staff officers in the army, presidents of national parties and the secretaries general of national parties.

28Domestic PEPs are also members of the board of directors or the management of state-owned companies of national importance. In this context, the message “specifically” refers designated the Post Office, Swisscom, Swiss Federal Railways (SBB), Swiss National Accident Insurance Fund (SUVA), Federal Office for Defence Procurement (ArmaSuisse), the arms manufacturer Aktiengesellschaft (RUAG), the Swiss Federal Laboratories for Materials Testing and Research (EMPA) and the Swiss Federal Nuclear Safety Inspectorate (ENSI) as state-owned companies of national importance. Due to the use of the term “in particular”, the list is not exhaustive. However, based on the selected organizations, it allows the conclusion that the term “company” must be interpreted broadly, in line with the analogous application to foreign PEPs under Art. 2a para. 1 let. a AMLA. In this context, Greter points out that the list includes not only Swisscom, a state-owned company with commercial objectives, but also the ENSI, the Swiss Federal Nuclear Safety Inspectorate. The ENSI emerged from the Federal Office of Energy and has existed as an independent public-law institution since January 1, 2009. It can therefore be assumed that the term “enterprise” also refers to organizations that carry out activities that were originally performed by the federal administration but were later transferred by law to an independent public-law institution. Based on the explanations regarding the term “national significance” in the case of foreign PEPs, this primarily refers to state-owned enterprises that are held by the Swiss Confederation and not by the canton. On this basis, the following organizations, for example, may be state-owned enterprises of national importance: the Swiss Federal Institute of Technology (ETH), the École Polytechnique Fédérale de Lausanne (EPFL), the Swiss Financial Market Supervisory Authority FINMA, the Swiss National Bank (SNB), the Swiss Export Insurance (SERV), the Swiss National Museum, Pro Helvetia, the Federal Audit Oversight Authority (FAOA), the Federal Institute of Metrology (METAS) or even identidad AG, an organization for setting up and operating the Swiss animal database. Based on the same term for foreign PEPs, the financial intermediary is also free to classify a state-owned company at the subnational level as a state-owned company of national importance based on the aforementioned analogous criteria. Applying the criteria, for example, companies designated by the Swiss government as systemically important electricity suppliers that are owned by cantons may be classified as state-owned companies of national importance. On this basis, their members of the board of directors or the executive board would be domestic PEPs.

29 The FATF recommendation was implemented by focusing on functions at the national level. Functions at the subnational level, such as members of the cantonal government, cantonal attorneys general, presidents of cantonal political parties or public functions at the municipal level, are not covered by the article. In the dispatch, however, the Federal Council encouraged financial intermediaries to develop their own criteria for also listing functions at the cantonal or municipal level as a domestic PEP in line with a risk-based approach. This request also includes the board of directors and senior management of companies that are managed at the cantonal level.

V. Intergovernmental organizations

30 Art. 2a para. 1 let. c AMLA covers persons who are or have been entrusted with a “leading function” in an “intergovernmental organization” or in “international sports federations”. Intergovernmental organizations are based on an agreement between states, in which their rights and duties are regulated. They are considered to be separate subjects of international law and are not necessarily treated the same as other organizations in their countries of domicile. The agreement may, for example, contain a special status with immunities and privileges. Examples of intergovernmental organizations are the United Nations (UN) and its sub-organizations, the International Monetary Fund (IMF), the European Union (EU) and its sub-organizations, the World Health Organization (WHO), the European Organization for Nuclear Research in Geneva (CERN), but also the International Committee of the Red Cross (ICRC). This does not include international private-law organizations that were not established by an agreement between states, such as non-governmental organizations like Greenpeace, Amnesty International, United Nations Children's Fund (UNICEF) Switzerland Liechtenstein. International sports organizations such as the International Olympic Committee (IOC) or the Fédération Internationale de Football Association (FIFA) are also not included under this term. However, the latter are treated separately in Art. 2a para. 5 AMLA.

31 The definition of a “leading function” within an intergovernmental organization is determined by its organization. In principle, however, it can be assumed that this refers to the representatives at the highest hierarchical level, i.e. secretaries-general, directors, deputy directors, but also members of the highest governance bodies, such as the chief financial officer (CFO) of an intergovernmental organization.

VI. International Sports Federations

32 Art. 2a para. 1 lit. c AMLA also covers persons who have or have had a “leading function” in “international sports federations”. This addition is not based on a recommendation of the FATF. It is also not included in the message on the law. In March 2014, the Council of States decided to introduce this addition in view of the susceptibility to corruption of international sports organizations based in Switzerland. The National Council then added a definition of “international sports federations” under Art. 2a para. 5 AMLA. According to this section, the IOC “as well as non-governmental organizations recognized by it that govern one or more official sports at the global level” fall under this definition. According to this understanding, the IOC's organizations such as the Association of Summer Olympic Federations (ASOIF), the Winter Olympic Federations (WOF) or the International World Games Association (IWGA) fall under this definition. Examples of international sports federations recognized by the IOC are FIFA, the International Ice Hockey Federation (IIHF), the World Bridge Federation (WBF) and the World Dance Sport Federation (WDSF). This information is available on the IOC website. Accordingly, regional organizations such as the Union of European Football Associations (UEFA), the Swiss Football Association or organizations that are not currently recognized by the IOC, such as the International Boxing Association (IBA), are not “international sports federations” within the meaning of Art. 2a para. 5 AMLA.

33 The PEP concept is based on a risk-based approach. It is therefore up to the financial intermediary to decide whether to register natural persons who have or have had a leading function in a regional sports organization or who work or have worked in a sports organization not recognized by the IOC as PEPs within the meaning of Art. 2a para. 1 let. c AMLA. Possible criteria may include, for example, the size of the organization, references in the media to possible reputational risks in connection with the organization itself or with exponents in a leading function.

VII. Close associates

34 The conviction that the same risks may emanate from family members of PEPs or persons close to PEPs as from the PEPs themselves was a decisive factor for the initiators of the PEP concept. The “Supervisors' PEP Working Paper 2001” of November 2001 still used the subjunctive when assessing the risks of a person close to a PEP. However, this assessment did not prevail. In the 40 Recommendations published in 2003, the FATF made it clear that the reputational risks of PEPs and persons close to PEPs are the same. Art. 2 para. 1 let. aa of the FINMA Anti-Money Laundering Ordinance therefore also designated persons who were clearly close to the PEP for family, personal or business reasons as PEPs. This paragraph was adopted in Art. 2a para. 2 AMLA, but, as already mentioned, limited to natural persons. For the reasons already mentioned, persons close to PEPs do not present a different risk compared to the PEPs themselves. Accordingly, business relationships with persons close to PEPs are treated the same as a business relationship with the PEP themselves in accordance with Art. 6 para. 3 and 4 AMLA.

35 The term 'close associate' is not defined in Art. 2a para. 2 AMLA. However, it is clear from the context that 'close associate' describes a relationship between a natural person and a PEP that suggests a mutual familiarity. The FATF had described the closeness referred to as 'family members' and 'close associates'. Art. 2 para. 1 lit. a aGwV-FINMA specified the reasons for “close” to the three characteristics “family”, “personal” or “business”. However, it is a challenge for a financial intermediary to recognize the closeness of a natural person within the meaning of Art. 2a AMLA. For this reason, the attribute “identifiable”, which was already included in Art. 2 para. 1 let. a aGwV-FINMA, was deliberately retained. This is to protect the financial intermediary from the accusation of incomplete fulfilment of the due diligence obligations if, after an ordinary clarification has been carried out when a business relationship is established, relevant indications should arise at a later point in time. This also makes it clear that the term “discernible” refers to indications that may arise during standard checks when opening a business relationship and during the ongoing proper monitoring of business relationships and the transactions carried out within those relationships. In practice, this includes questioning the contracting partner when the account is opened, using lists of names of PEPs and persons close to PEPs when comparing customer data, taking into account the restrictions mentioned, and, last but not least, the attention of the staff responsible for these process steps through appropriate training on this topic, which is provided as part of the regular training process on regulatory topics. The financial intermediary is not required to take any measures beyond those mentioned in order to identify a natural person as a PEP.

36 Close family members of the PEP, such as partners, siblings, children, parents or grandparents, are considered to be related to the PEP for “family” reasons. The group of persons concerned depends on the social, cultural or religious environment. For example, there are large ruling families on the Arabian peninsula whose members enjoy privileges due to their origin, without them performing a public function in the government and without any direct connection to the PEP other than the same family name, but who may still be deemed to be close associates of a PEP. Taking the above criteria into account when selecting the persons concerned also means, however, that evidence of a verifiable estrangement between the natural person and the PEP, in the form of a divorce, for example, can be taken into account in the assessment. Possible criteria include the duration of the separation, a clear separation of assets and the origin of assets between the PEP and the natural person.

37 Based on the understanding of “familial” reasons, “personally” close can only mean a close relationship with the PEP without a familial relationship. This category includes natural persons who are close to a PEP due to an affair or friendship. The risk-based approach means that the selection of this group of persons always requires an assessment of the quality of the relationship. The assessment takes into account the cultural, social and religious environment, but also personal aspects of the relationship, such as its long-standing and uninterrupted duration. As a result of such an assessment, a relationship with a godchild may fall into this category, as may long-standing relationships between natural persons within organizations (e.g. clubs, associations, religious sects). Such relationships can also change, so that after a time there is no longer any recognizable closeness. Criteria for this assessment may include, for example, the dissolution of the partnership, which also includes a comprehensible separation of joint assets. The category of “personally” close does not include demonstrably fleeting encounters with a PEP, such as an appearance by a person at a public event with a PEP that can be explained by their respective functions in relation to the event.

38 Accordingly, “business” close describes the relationship of trust between a PEP and a natural person that exists or has arisen on the basis of jointly conducted business. This category therefore includes long-standing business partners who jointly bear the entrepreneurial risks of their projects, which is why mutual financial dependencies also exist. In its FAQ on PEPs from 2017, the Wolfsberg Group also referred to personal advisors of PEPs, in particular those who manage PEP funds in a fiduciary capacity, as business-related. The nature of the relationship in this sense is therefore based on common business and financial interests, whereby the relationship between the natural person and the PEP must also include elements of mutual familiarity. Thus, an employment relationship with a PEP, which may also include the activity described in the FAQ mentioned above, or the fact that a natural person is on the board of directors of a company together with a PEP and other members, is not in itself an indication of a person closely associated with a PEP for business reasons. Even long-standing employees of a company that is majority-owned or controlled by a PEP are not necessarily business associates, especially if the natural person has demonstrably pursued a professional career outside the company concerned, in which case it can be assumed that the person is not fully financially dependent on the PEP.

VIII. End of PEP status

39 Experience has shown that the risks for the financial intermediary of business relationships with a PEP connection do not end with the termination of the mandate qualifying as a PEP. Investigations in cases of corruption, indications of misappropriated funds or risks to reputation that could impact the reputation of the financial intermediary usually only become known after the termination of the function or even after the PEP has passed away. The risk depends on the political situation and corruption risk of the country in question that has awarded the PEP-relevant mandate, but also on the PEP's mandate and the influence associated with it. Because these are individual factors, there is no generally valid statement as to how long the PEP status should exist. Two concepts attempt to limit the associated risks: either never to limit the PEP status (“once a PEP always a PEP”) or to choose a risk-based approach (“once a PEP could always be a PEP”). In line with the FATF and the Wolfsberg Group, the Federal Council preferred a risk-based approach. Parliament, on the other hand, decided to introduce a time limit for domestic PEPs: According to Art. 2a para. 4 AMLA, the status for domestic PEPs lapses 18 months after they have ceased to hold office. However, for the reasons mentioned, the end of the qualification for domestic PEPs does not mean that there are no longer any risks associated with the business relationship. Under certain circumstances, the financial intermediary can continue to classify the business relationship as a higher-risk relationship.

40 The risk-based approach to assessing PEP status after the function has been abandoned is therefore applied to foreign PEPs or to PEPs based on a function in an intergovernmental organization or in international sports federations. Several factors should be considered in these deliberations. These include the corruption risk of the country or organization that has awarded the function. The political structure of the country in question should also be taken into account, such as whether it has a functioning separation of powers. The Wolfsberg Group provided a comprehensive list of criteria in its FAQ on PEPs published in 2017. This also includes any negative reporting about the PEP in public sources. The FAQ recommends applying the risk-based approach even to deceased PEPs, because in this case the risks remain unchanged. For living persons, the FATF considers whether the PEP will continue to have influence after leaving office or whether any new function assumed is in any way connected to the past one. Consequently, the termination of the PEP qualification must also have an impact on the same qualification of PEP-related persons, i.e. PEP-related persons also lose their qualification in this case. When assessing the end of the PEP status, it is not decisive whether the financial intermediary has a business relationship with the PEP himself or with the PEP-related person. The risks associated with a PEP exist regardless of how distantly connected the PEP is to the close associate. The end of the PEP qualification 18 months after giving up the function at domestic PEP can also be read as an indication that the legislator considers the domestic PEP to be a lower risk compared to foreign PEP or in the case of a PEP based on a function in an intergovernmental organization or in an international sports federation according to Art. 2a para. 1 lit. a or Art. 2a para. 1 lit. c AMLA as posing a lower risk. Consequently, the 18-month period can also be applied as a minimum period for the PEP qualification after giving up the function for foreign PEPs or for PEPs based on a function in an intergovernmental organization or in an international sports federation. In the case of existing PEP relationships, the continuation of which must be approved annually in accordance with Art. 19 para. 1 lit. a GwV-FINMA, this practice may be applied if two previous authorizations have been granted without complaint. When the PEP designation is removed, it is advisable to carry out clarifications in accordance with Art. 15 GwV-FINMA and Art. 6 AMLA in order to fulfill any reporting requirements.

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Materials

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