The importance of sanctions and embargoes has increased significantly in recent years — also for Swiss asset managers. FINMA and the supervisory organisations (SO) now expect active and documented management of sanctions risks, regardless of an institution’s size or business model.
Switzerland implements sanctions through ordinances based on the Embargo Act. While UN sanctions are binding, the adoption of EU, US, and UK measures is decided on a case-by-case basis. Additionally, US regulations are increasingly having indirect effects — for example, through USD payment transactions or correspondent banks.
Asset managers with clients from high-risk countries or those linked to sensitive sectors must act with particular care.
FINMA expects asset managers to compare new entries on sanctions lists with their client base in principle, within 24 hours, as a rule. Depending on the institution’s risk profile, this may involve not only the SECO lists but also the sanction regimes of the EU, USA (OFAC), and UK.
For asset managers with only low-risk business models — for instance, exclusively Swiss clients with Swiss, EU, or UK custodian banks — a comparison within one week is considered acceptable.
A purely automatic comparison of the client base using third-party databases is sometimes not sufficient, since many providers only incorporate new listings with a delay.
It is the asset manager’s responsibility to ensure the up-to-date status of sanctions data and to independently monitor its integration into internal processes and systems. Even if supervisory reviews do not include a deep examination of sanction compliance, this does not release the institution from the obligation to regularly match its client base with the applicable sanctions lists.
Client advisors are usually the most familiar with their clients. It is recommended that they subscribe to the sanctions newsletters from SECO or other relevant sources. When a new name is published on a sanctions list, the client advisor should check it against their client portfolio. Alternatively, the sanctions list screening may be delegated by the client advisor to a central first line of defense unit within the asset management firm. In this case, the central unit would carry out the screening for the entire client base.
If false positives occur during the screening process, it is recommended to document them in the client file.
It is recommended to establish a monthly check within the Internal Control System (ICS), in which client advisors and/or a central unit actively confirm that they have reviewed the sanctions updates within the required timeframe.
In addition to the manual review by client advisors, a regular, systematic screening of the entire client population (batch screening) should be conducted. This can be done using screening tools from external providers (e.g. LexisNexis, World-Check) and serves to standardise the identification of potential sanctions risks.
An initial screening should also be carried out when engaging with new prospects or when opening a mandate or account. The same applies to involved third parties — for instance, in transactions with higher risk.
