Risk Analysis on Money Laundering and Legal Entities Published
Foreign legal entities and complex legal structures, in particular, pose an increased risk of money laundering. This is demonstrated by the risk analysis «National Risk Assessment (NRA): Legal Entities and Legal Arrangements» conducted by the Interdepartmental Coordination Group for Combating Money Laundering, Terrorism Financing, and Proliferation Financing (KGGT).
The Coordination Group for Combating Money Laundering and Terrorist Financing (KGGT) has updated its sectoral risk analysis on legal entities and legal arrangements. The 109-page report by fedpol and the Money Laundering Reporting Office (MROS) builds on the initial analysis from 2017 and now also includes fiduciary relationships, company formations, as well as associations and foundations. The update was prompted, among other things, by the Panama, Paradise, and Pandora Papers, which had brought to light the misuse of legal entities for money laundering.
Foreign Companies and Domiciled Companies as the Main Risk
About one-quarter of the suspicious activity reports received by MROS concern counterparties that are legal entities or legal arrangements—an indication of the ongoing potential for abuse. The key finding of the analysis is that foreign legal entities and legal arrangements continue to pose a higher money laundering risk than Swiss ones. The decisive factor here is not so much the legal form as whether a company is actually engaged in operational activities or exists merely as a shell company with no actual business operations. Foreign shell companies domiciled in a high-risk country, as well as complex, cross-border structures without a discernible economic purpose, are particularly high-risk. Trusts—especially discretionary trusts in which the beneficiaries are not disclosed or are subject to change—are also considered high-risk if they are administered abroad. Swiss trustees, on the other hand, are subject to supervision and the Anti-Money Laundering Act (AMLA), which significantly reduces the risk.
Among Swiss legal structures, the stock corporation stands out in particular: It is overrepresented in suspicious activity reports because it has a stronger international focus than the more person-oriented limited liability company (GmbH) or cooperative. Even companies that appear to be engaged in legitimate business operations can serve as fronts for money laundering—industries such as management consulting, legal consulting, auditing, financial and insurance services, and the construction industry are particularly at risk. Attorneys, notaries, and trustees can play an important role in the formation and structuring of such entities, for example, in the domiciliation of shell companies or in fiduciary asset management. The financing of terrorism plays only a marginal role overall with respect to legal entities—with the exception of associations and foundations, where risks exist primarily in fundraising and the collection of donations.
Stricter regulations since 2017
Switzerland has significantly strengthened its regulatory framework since 2017: bearer shares have been abolished, trading companies are now required to maintain share or unit registers, and criminal penalties as well as stricter due diligence requirements for financial intermediaries have been introduced. In September 2025, Parliament also passed the Federal Act on the Transparency of Legal Entities (TJPG) and an amendment to the Anti-Money Laundering Act (GwG). As a result, authorities will have faster and more comprehensive access to information about beneficial owners in the future—including for foreign companies with ties to Switzerland, such as through branches or real estate holdings. Advisory service providers such as attorneys, notaries, and trustees operating in high-risk areas are now also subject to the GwG.
Recommendations from the KGGT
According to the report, the impact of these new regulations is not yet known and will need to be monitored in the coming years. The KGGT recommends:
- Assessment of the effectiveness of the new regulations governing consulting service providers and fiduciary activities, with adjustments as needed
- Raising Awareness of Terrorism Financing Risks in the Foundation and Association Sector
- Effective implementation of the transparency register, with risk-based controls and widespread use by government agencies and financial intermediaries
- Widespread awareness-raising among government agencies, financial intermediaries, and advisors regarding the findings of the risk analysis, particularly with respect to foreign legal entities
- Consistent and regularly reviewed implementation of measures against shell companies
You can read the full report here Read.
Source: fedpol
Report summarized using AI.
