I. General

1 According to Art. 2 para. 1 let. b AMLA, so-called “dealers” are covered by the AMLA in addition to financial intermediaries. According to the law, dealers are natural or legal persons who trade in goods on a commercial basis and accept cash in payment. The terms “dealer”, “commercial trade” and “goods”, which are used in Art. 2 para. 1 let. b AMLA, are defined in Art. 13–15 AMLO. For more information on these terms, the history of the dealer provisions, the FATF provisions and EU law, please refer to the commentary on Art. 2 para. 1 AMLA (N. 18 ff.).

2 The AMLA applies only to persons who, in the course of a commercial activity as dealers in goods, accept cash in the amount of more than CHF 100,000 (see Art. 8a para. 1 AMLA). The due diligence requirements of Art. 8a para. 1 AMLA thus limit the personal scope of the AMLA for dealers.

II. Due diligence requirements for dealers

A. General

3 The dealer due diligence requirements under Art. 8a AMLA are specified in Art. 17–21 AMLO (see Art. 8a para. 5 AMLA). The law explicitly refers to the duties that apply to financial intermediaries. In particular, the duties for financial intermediaries that relate to spot transactions are applicable to dealers. Deviations for dealers can only be assumed if explicitly defined rules to the contrary are set out in the law or in the ordinances. Accordingly, reference is made at this point to the comments on Art. 3, Art. 4 and Art. 7 AMLA. The comments contained therein can be applied to dealers, unless the provisions of Art. 8a AMLA in conjunction with 17–21 AMLO-FINMA deviate from the AMLA provisions on financial intermediaries.

4 The due diligence requirements for dealers require the cooperation of the contracting party of the dealer (i.e. the buyer) or the representative acting on behalf of the dealer. Without their cooperation, the dealer cannot fulfill the obligations and is required not to accept the cash payment of CHF 100,000.

B. Identifying the contracting party (Art. 8a para. 1 let. a in connection with Art. 3 para. 1 AMLA and Art. 17 AMLO)

5 A merchant who accepts more than CHF 100,000 must identify the contracting party (i.e. the buyer). The merchant must establish the person's surname, first name, address, date of birth and nationality (Art. 17 para. 1 AMLO), unless the use of this information is not customary in the person's country of origin (Art. 17 para. 2 AMLO). The person must be identified by inspecting the original of an official form of identification, i.e. passport, ID card or driver's license (Art. 17 para. 3 lit. a AMLO). The merchant must check whether the ID can be assigned (Art. 17 para. 3 let. b AMLO), make a copy of the ID (Art. 17 para. 3 let. c AMLO) and note on the copy that the original has been inspected (Art. 17 para. 3 let. d AMLO). The copy must be kept (documentation requirement, see Art. 21 AMLO). Unlike financial intermediaries (see FINMA Circular 2016/7), traders are not required to identify the contracting party via digital channels.

6 The contracting party to be identified is the person who purchases the goods from the dealer and thus becomes the owner of the goods. The representative who may act on behalf of the buyer does not need to be identified. If the representative acts on the basis of a power of attorney, the information on the buyer contained in the power of attorney must match the information determined by the dealer. A representative must either provide the information in accordance with Article 17, para. 1 AMLO if the buyer is a natural person or the company name and registered office of the buyer if the buyer is a legal entity (Article 17, para. 4 AMLO).

C. Identifying the beneficial owner (Art. 8a para. 1 let. b in conjunction with Art. 4 para. 1 and 2 let. a and b AMLA and Art. 18 AMLO)

7 A dealer is obliged to determine the identity of the beneficial owner (Art. 8a para. 1 let. b in conjunction with Art. 4 para. 1 and 2 let. a and b AMLA) by asking the contracting party or the contracting party's representative whether the contracting party is the beneficial owner of the cash to be handed over (Art. 18 para. 1 AMLO). In other words, it must be determined whose money or on whose account the goods were purchased by the dealer. In simple terms, it is about who “owns” the cash. This determination can be legally complex. If the contracting party is not the beneficial owner, the dealer must request a written declaration from the contracting party or the contracting party's representative stating the identity of the beneficial owner (Art. 18 para. 2 AMLO). The written declaration may be made using the form or document referred to in Art. 21 AMLO and Annex 1 AMLO (Art. 18 para. 6 AMLO). The beneficial owners are the natural persons on whose account the purchase is made (Art. 18 para. 2 let. a AMLO). The beneficial ownership of the object of purchase is not required in itself – even if, according to the view represented here, the explanatory report on the AMLO is to the contrary – (and in exceptional cases this may differ from the beneficial ownership of the cash). In principle, the beneficial owner(s) is/are one or more natural persons. In the case of an acquisition for the account of an unlisted, operationally active legal entity or partnership, the beneficial owners are either the natural persons who have voting rights or capital of at least 25 percent directly or indirectly, alone or in concert with third parties (Art. 18 para. 2 lit. b no. 1 AMLO), or natural persons who exercise control in some other way (e.g. by directly influencing business activities) (so-called control holders, Art. 18 para. 2 lit. b no. 2 AMLO). In the case of legal entities, the dealer is therefore obliged to ask the contracting party about the ownership and control structure (e.g. powers of attorney or shareholder agreements). If no beneficial owners can be identified, the identity of the most senior member of the governing body must be established (Art. 18 para. 3 AMLO). In the case of companies listed on the stock exchange, the beneficial owners do not have to be identified. If it is an association or a foundation that has no beneficial owner, this must be recorded accordingly (Art. 18 para. 7 AMLO). To identify the beneficial owners, the dealer requires the following information: first name and last name, address, date of birth and nationality (Art. 18 para. 4 AMLO).

8 Even though the duty to identify the beneficial owner is modeled on and even explicitly refers to Article 4 AMLA, there are some differences: the object of beneficial ownership is always cash (Art. 18, para. 1 AMLO). Furthermore, Art. 18 AMLO seems to deviate from the definition of beneficial ownership in Art. 4. This is probably largely due to the questionable decision of the legislator to link to Art. 4 AMLA on the one hand and to formulate an order to the Federal Council to further specify the duty for dealers in accordance with Art. 8a para. 2 AMLA at the ordinance level on the other.

D. Documentation requirement (Art. 8a para. 1 let. c in conjunction with Art. 7 AMLA in conjunction with Art. 21 AMLO)

9 According to the legal provisions, dealers are obliged to document the fulfillment of their due diligence obligations, whereby the provision for dealers refers to the regulation for financial intermediaries (Art. 8a para. 1 lit. c in conjunction with Art. 7 AMLA). The form of the documentation is largely unrestricted, as long as it contains all the relevant information about the contracting party, allows for a review by the auditors and ensures that any request for information or seizure can be fulfilled within a reasonable period of time (see Art. 7 para. 2 AMLA). A sample form is provided in Annex 1 of AMLO, but its use is optional (Art. 21 para. 1 AMLO). This form or another document must be used to record the customer's details (Art. 17 and 18 AMLO), the additional clarifications (Art. 19 AMLO) and the submission of a report (Art. 20 AMLO) (Art. 21 para. 2 AMLO). The records must be created promptly, dated (date of purchase), signed and stored physically or electronically for a period of ten years (Art. 21 para. 3 and 4 AMLO), whereby dealers must observe the FADP.

E. Additional clarifications (Art. 8a para. 2 AMLA in conjunction with Art. 19 AMLO)

10 Art. 8a para. 2 AMLA is the counterpart for dealers to the special due diligence requirements of Art. 6 AMLA for financial intermediaries, but is less extensive in content. If a transaction seems unusual to a dealer or there are indications of money laundering, he must check the background to the transaction and its purpose more closely (Art. 8a para. 2 AMLA). The review must be carried out without delay, in particular because the report that may subsequently have to be drawn up (Art. 9 para. 1^bis AMLA) must be made without delay. The review is carried out by the merchant asking the contracting party or the representative about the background and purpose of the purchase, assessing the information for plausibility and recording the clarifications in writing (Art. 19 para. 3 AMLO). These additional clarifications may be necessary if the information gathered in accordance with Art. 17 and 18 AMLO is insufficient to provide the merchant with a clear picture of the business and the origin of the cash. They serve to improve the customer-related risk profile. A payment of CHF 100,000 in cash is not unusual per se.

11 What appears unusual to one merchant may be perfectly normal for another. Each merchant must individually assess when a transaction is unusual and thus when additional clarifications are required, based on the type of business, the usual clientele, experience and the location of the business itself.

12 Art. 19 para. 2 AMLO lists some possible indications of money laundering (“in particular”) and does not do so exhaustively. Indications of money laundering include, for example, if the person pays predominantly with banknotes of small nominal value, if mainly easily sold goods with a high degree of standardization are purchased, if the person provides no or insufficient information for their identification or to establish the identity of the beneficial owner in accordance with Article 18 AMLO, if the person provides obviously false or misleading information or if there are doubts as to the authenticity of the identification documents presented. The list is based on the analogous regulation for financial intermediaries in the appendix to AMLO-FINMA, but is tailored to purchasing transactions. If dealers recognize such indications, they are obliged to carry out further clarifications. However, the presence of an indication does not automatically mean that a report must be made to MROS immediately. A report must be made if the initial suspicion is confirmed in the course of additional clarifications or if the suspicion cannot be dispelled (Art. 9 para. 1^bis AMLA).

F. Amount threshold and circumvention (Art. 8a paras. 1 and 3 AMLA)

13 Art. 8a AMLA is linked to the threshold of CHF 100,000 in cash. Foreign currencies must be converted into francs on a daily basis in order to assess the applicability of Art. 8a AMLA. However, the obligations under Art. 8a paras. 1 and 2 AMLA also apply if the cash payment is made in several tranches and the individual tranches are less than CHF 100,000 but exceed this amount when added together (Art. 8a para. 3 AMLA, so-called “smurfing”). As soon as several transactions between the same parties are carried out in close temporal or economic connection, the partial amounts are added together, which may lead to the seller being recorded as a dealer subject to AMLA. This is the case, for example, with an installment payment of a total amount of over CHF 100,000. Various commercial transactions between the same parties that are not economically or temporally related are to be considered separate purchases that do not trigger the applicability of Art. 8a AMLA. This distinction can be difficult to make in practice.

14 The amount threshold of CHF 100,000 is remarkably high in comparison to other countries (EU: EUR 10,000). For precious stone and precious metal traders, the latest bill to amend the AMLA (draft and message of May 22, 2024) provides for the thresholds to be lowered to 15,000 francs in order to be compliant with the FATF recommendations. The bill will be discussed by parliament in the near future (as of the end of August 2024). In my opinion, the amendment is to be welcomed, as the thresholds of the Swiss AMLA are far too high compared to EU-related countries and therefore there is potential for money laundering.

III. Involvement of third parties (Art. 16 AMLO and Art. 8a para. 4 AMLA)

15 If dealers involve a third party to carry out the transaction and to accept the purchase price in cash, the dealers must, regardless of their legal relationship with the third party, ensure that the due diligence and reporting requirements are complied with by the third party (Art. 16 AMLO). If the purchase price is received in cash on behalf of the dealer (without processing), this is not subject to the AMLA, as this constitutes a collection service that is not subject to the AMLA (see Art. 2 para. 2 let. a no. 2 AMLO). If the third party is a financial intermediary, Art. 8a para. 4 AMLA applies, i.e. the dealer is not subject to the AMLA for the cash sale, but the third party is subject to it as a financial intermediary. Traders therefore have a choice: either they accept the cash and have to fulfill the AMLA obligations, or they persuade their customers to pay the debt through a financial intermediary (e.g. by bank transfer).

IV. Legal consequences of violating the due diligence requirements

16 The AMLA does not provide for any criminal penalties for dealers who violate the due diligence requirements under Article 8a AMLA. Only the violation of the reporting requirement (Article 37 AMLA) and the violation of the requirement to commission an auditor to verify compliance with the requirements (Article 38 AMLA) are subject to criminal penalties. The penal provisions of the FINMASA do not apply to dealers. Dealers can be held criminally liable under Art. 305^bis SCC for knowingly and willingly participating in or failing to act (the AMLA obligations establish a corresponding guarantor position). However, Art. 305^ter SCC does not apply to dealers. There are no regulatory consequences to be feared, since dealers are not subject to the supervision of a self-regulatory organization or FINMA. For the penal provisions and the criticism in this regard, please refer to the comments on Art. 37 and Art. 38.

V. Additional obligations

17 In addition to the due diligence requirements under Art. 8a AMLA (clarified in Art. 17 et seq. AMLO), dealers under Art. 9 para. 1^bis AMLA must file a report if certain suspicious facts arise. In this regard, reference is made to the commentary on Art. 9 AMLA.

18 Dealers must appoint auditors to verify their compliance with the AMLA obligations that apply to them (Art. 15 AMLA). Please refer to the commentary on Art. 15 AMLA.

19 In doctrine, it is also argued that dealers – despite the absence of an explicit provision in the law or the ordinance – are also required to take organizational measures to comply with the obligations incumbent on them. This suggests – as noted in the commentary on Art. 8 AMLA (see N. 2) – that the organizational duty is not a separate due diligence requirement, but rather a prerequisite for compliance with the AMLA obligations. In my view, a merchant who violates his obligations under Art. 8a AMLA due to inadequate organization would not be guilty of violating Art. 8 AMLA. This is not possible due to the lack of a reference in Art. 8a AMLA to Art. 8 AMLA. In the event of inadequate organization and the commission of a criminal offense within the dealer's company, criminal liability under Art. 102 SCC may result under certain circumstances.

VI. De facto ban on cash payments over 100,000 francs

20 When the merchant provisions were created, it was already being predicted by academics and legislators that the regulation would lead to a de facto ban on cash payments of over 100,000 francs. This is because compliance with the obligations involves much higher costs and hardly any advantages compared to involving an external financial intermediary. In my opinion, this prediction has come true. Traders have little need for advice and rarely report anything to MROS, which suggests that amounts over 100,000 are processed with the help of a financial intermediary (Art. 8a para. 4 AMLA). A follow-up question from the author to some audit firms revealed that they either have no or only very few mandates from traders. The AMLA provisions for dealers are thus neglected and, in my opinion, can be described as a “non-starter” – it would be less costly to completely ban cash payments above a certain threshold. Whether this is appropriate is a political question that is not easy to answer.

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Materials

Botschaft zum Bundesgesetz über die Transparenz juristischer Personen und die Identifikation der wirtschaftlich berechtigten Personen, nicht datiert (Vorabdruck), 2024, abrufbar unter https://www.newsd.admin.ch/newsd/message/attachments/87770.pdf, besucht am 31.8.2024 (zit. Botschaft TJPG 2024).

Erläuterungsbericht zur Geldwäschereiverordnung (GwV) – Umsetzung der GAFI-Empfehlungen vom 11.11.2015, abrufbar unter https://www.newsd.admin.ch/newsd/message/attachments/41723.pdf, besucht am 31.8.2024 (zit. Erläuterungsbericht GwV 2015).

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