Swiss SRO regulation

December 28, 2022

The Swiss federal law against money laundering establishes two main types of licensing for financial services in Switzerland: direct licensing with FINMA and membership in a self-regulatory organization (Self-Regulatory Organizations).What does membership in SRO imply, what are its functional features and requirements for obtaining?

Basic demands for SRO Membership

The overriding legal requirement for membership in an SRO is that the applicant must have a subsidiary or other permanent physical presence in Swiss.

Until 2020, financial intermediation services (currency exchange, issuance of loans, trust management and custody services, and so on) could be carried out under the so-called direct (directly through FINMA) or indirect (through one of the self-regulatory organizations – SROs subordinate to FINMA) regulation.

Accordingly, if you choose Swiss SRO licensing of financial services for yourself, you need to be prepared for authorized capital in size at least – 50,000 CHF (paid at the stage of company establishment). Your director and Compliance officer must be resident in Swiss and of course there is the classic requirement to have a local office. What functionality does membership in the Swiss SRO tax treatment cover?

Main function on Self-Regulatory organizations

The functions of the SRO include:

  • Reception, processing of applications for obtaining permission to provide financial intermediation services.
  • Checking the conformity of the submitted documents with the requirements of the legislation.
  • Determination of the procedure for interaction with supervision and control over compliance with legislation in the field of AML.
  • Carrying out regular audits of the activities of the regulated company, depending on the degree of riskiness of the services provided.
  • Issuance and control of execution of instructions after the audit of the company’s activities.
  • Withdrawal of permission and application of sanctions in case of violation of the requirements of the law and FINMA regulations.

Active organizations in Swiss

There are 11 SRO organizations in Switzerland reporting to FINMA and performing the functions of the regulator’s oversight:

  • Web & Mobile Apps
  • SAAM
  • OAD FCT
  • ARIF
  • SRO SAV/SNV
  • SLV
  • OAR-G
  • SRO SVIG
  • SRO-TREUHAND | SUISSE
  • PolyReg Allg. Selbstregulierungs-Verein
  • SRO-SVV

Updated SRO regulation in Swiss

On August 26, 2019, the Swiss FINMA published the Guideline 02/2019 regarding blockchain payments. This Guide informs market participants about FINMA’s interpretation of the AML regulation in the context of blockchain payment services.

It was this document that approved the requirement for service providers to transfer information about the sender and recipient of payment to recipient institutions. The practice adopted by FINMA is rather restrictive and goes beyond established standards.

Currently, this practice will significantly reduce the ability of Swiss market participants to offer payment transactions in digital tokens. While the Guidance applies only to service providers subject to FINMA supervision, such as banks, it can be expected that recognized Swiss SROs will be required to follow suit in interpreting similar provisions in their regulations.

As we can see, SRO membership provides not only business licensing in the prestigious Swiss jurisdiction as a marketing advantage for your clients, but also a wide range of powers, up to the legally regulated right to work with digital currencies..

Advantage of financial intermediary status in Switzerland

The main advantages are that the capital requirements are lower than in Europe and it only requires a capital of 100,000 Swiss francs, of which only 50,000 Swiss francs only needs to be subscribed

A second advantage is that other financial Swiss intermediaries, as described above, can trade for their own account or for the other accounts. Now, in any other EU jurisdiction, a company that wants to trade on its own account will need capital of CHF 750,000.

Permitted financial services under an SRO license

  • Work with borrowed funds (client loans or credits, factoring, commercial financing, leasing);
  • Ensuring money transactions to third parties.
  • Issuance of means of payment – credit or debit cards or traveler’s checks;
  • Purchase and sale (trading) with own funds or funds of third parties using financial instruments, precious metals, shares, bonds, derivatives;
  • Currency exchange;
  • Investing third party funds and providing investment advice;
  • Custodian services for shares (public and non-public), their management;
  • Small Payment Institution Services.

Swiss regulation of finances is not simple, and depending on the specific scheme, activities may fall under several financial laws. To clearly understand what kind of license you need, you need to analyze the planned activity.

SRO and cryptocurrency

Recently, there has been an increase in the number of cryptocurrency projects among the members of the VQF, the flagship of cross-industry SROs in Switzerland. Today we are talking about 88 companies, which is 7% of the total number of VQF members. Judging by the official statements of Simon Vaelti, one of the leaders of the association, the number of VQF members associated with digital currencies should only increase.

In addition, not so long ago, Swiss startup Utrust, the author of an innovative technological platform that allows merchants to accept digital currencies as payments and modernizes the payment industry as a whole, received membership in the SRO VQF. According to Nuno Correia, Co-Founder and CEO of UTRUST: “Ensuring membership in the SRO gives additional confidence to UTRUST, our operating model and the blockchain ecosystem as a whole. This sets a new standard for blockchain companies and gives a clear message that this technology is here to stay”.

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