In Switzerland, a financial intermediary refers to either a legal entity or an individual who, for a fee, takes on the responsibility of overseeing or managing assets belonging to third parties. They also assist other entities in making investments or facilitating the transfer of their assets.

In Swiss law, there are separate regulation frameworks for both Special Financial Intermediaries and Other Financial Intermediaries. Special Intermediaries can include banks, gaming houses, stockbrokers and insurance companies. Other Intermediaries, on the other hand, can include asset management, FX, money remittance and payment and credit providers. 

In Switzerland, Special Financial Intermediaries require a license and authorisation from FINMA to operate, whereas Other Financial Intermediaries can operate with supervisions from FINMA or as an SRO. 

The principal rationale behind these two major differences in regulation comes down to the Swiss Federal Act on Combatting Money Laundering and Terrorist Financing, or the AMLA. This Act was introduced on October 10th 1997 and has been in action ever since. To meet the requirements set out by the AMLA Act Special Intermediaries must obtain a license from FINMA and also be authorised in accordance with all operations. An Other Financial Intermediary simply needs to choose between being an SRO (self-regulatory organisation) or be directly supervised by FINMA to ensure it complies with all laws.

What is an SRO?

The primary responsibility of an SRO is to establish the necessary due diligence procedures that must be implemented to adhere to the standards prescribed by the AMLA. It is crucial for all activities conducted by financial intermediaries to align with these standards. Additionally, every SRO is required to formulate guidelines that enable intermediaries and their affiliated partners to fulfill their anti-money laundering obligations.

Supervision of SROs is carried out by FINMA, the regulatory authority responsible for overseeing their operations.

FINMA grants recognition to an organization as an SRO if the following conditions are met:

1. Development of a comprehensive set of rules that enable the company and its members to comply with the regulations stipulated by the AMLA.
2. Continual monitoring and assessment of compliance with the AMLA.
3. Ensuring that individuals responsible for enforcing these controls demonstrate compliance, adhere to appropriate business practices, and possess the necessary qualifications.

Similar to Special Financial Intermediaries, an intermediary under the supervision of an SRO undergoes a comparable level of oversight as if it were supervised directly by FINMA. Consequently, Other Financial Intermediaries are subject to the same degree of scrutiny as any other financial intermediary.

Once a company comes under the supervision of an SRO, this regulatory oversight becomes apparent. The company’s name is promptly forwarded to FINMA, and you can verify its listing on the FINMA SRO Member website. Please note that this process may occasionally take up to 30 or even 60 days, so there is no cause for concern if your company’s name does not appear immediately.

In summary, both Special and Other financial intermediaries are subject to identical regulation and supervision.

Activities of a Financial Intermediary

In article 2 paragraph 3 of the AMLA the different service is listed as: 

1. Carrying out transitions relating to consumer loans, commercial financing, leasing and mortgages
2. Providing services which relate in some way to payment transactions, including electronic transactions on behalf of other parties
3. Trading their accounts or the accounts of a third party, to be exchanged for banknotes, market instruments, precious metals, securities, stocks and derivatives
4. Managing assets
5. Making investments as an advisor
6. Holding or managing securities
7. The custody and trading of cryptocurrencies

Advantages of a Swiss Financial Intermediary License

One significant advantage lies of a Swiss Financial Intermediary License is in the capital requirement. Swiss Intermediary companies enjoy a lower capital requirement compared to their counterparts in the EU. They are obliged to make a capital payment of only 100,000 CHF, with an upfront payment of just 50,000 CHF.

The second notable advantage is that Other Financial Swiss Intermediaries are permitted to engage in trading activities for both their own accounts and on behalf of others. In the EU, a substantial capital of 750,000 CHF is required for a company to have such trading privileges.

At the same time, regrettably, due to Switzerland not being a member of the European Union, financial intermediaries cannot benefit from passporting. However, this limitation is mitigated by the Swiss government’s provision that allows these intermediaries to operate smoothly with clients globally, including those within the European Union, even without passporting rights.

Conclusion

As always, be sure to reach out to me with any questions or book a meeting here.

About Adam Tracy

Adam Tracy is a payments expert and entrepreneur who specializes in payment systems, blockchain technology, digital currencies, and other emerging technologies. He is the founder of Blockrunner, LLC that provides consulting services to clients in the blockchain, payments and cryptocurrency arenas.

Tracy has been involved in the payments industry as an attorney, consultant and entrepreneur since 2005, while he was become an expert in blockchain and cryptocurrency since its advent in 2013. Tracy has worked with a wide range of clients, including startups, established businesses, and investor – both in the United States and worldwide. He has advised clients on a wide range of compliance, legal and operational issues related to payment transfer systems, crypto token generation and architecture, cryptocurrency exchanges, regulatory licensing, smart contracts, and other blockchain applications.

In addition to his consulting work, Tracy has founded several companies in the payments, blockchain and cryptocurrency space, including a digital asset hedge fund, licensed electronic money institution and a blockchain-based tokenization platform. He is also a proponent of decentralized finance (DeFi) and has been involved in various DeFi projects.

Tracy is also a frequent speaker and writer on blockchain and cryptocurrency topics. He has been featured in a wide range of publications, including Forbes, Hollywood Reporters, CNBC, Reuters, CoinDesk, and Bitcoin.com.

Find Adam: https://linktr.ee/adamtracy

Blockrunner, LLC., is a financial services match-making marketplace and consulting company. We are not a bank, FI/NBFI, Payment Service Provider, deposit taking institution, trust, or money services business of any kind. We are not regulated by any financial regulator. Banking, Payment, Processing, and Licensing services are provided by our participating members. This website is for informational purposes only and does not constitute legal advice. If you need legal advice, please consult a licensed attorney in your jurisdiction.