The PRC exchange control-related compliance duties of Swiss banks towards PRC residents’ deposits
DOI | https://doi.org/10.1108/JMLC-11-2017-0064 |
Published date | 07 January 2019 |
Date | 07 January 2019 |
Pages | 62-75 |
Author | John Liebeskind |
Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
The PRC exchange control-related
compliance duties of Swiss banks
towards PRC residents’deposits
John Liebeskind
Meyerlustenberger Lachenal, Geneva, Switzerland
Abstract
Purpose –This paper aims to discuss the complianceduties of Swiss banks toward the Chinese exchange
controlin case of PRC residents’deposits.
Design/methodology/approach –The paper matches the Swissregulatory framework and practice in
matter of banks diligence with that of the PRC exchange controland tentatively identifies the consequences
resultingthereof for Swiss banks.
Findings –The paper finds that exchange control does fall within the scope of the Diligence Code. It
suggests that banks should broadlyinterpret the related provisions. While in case of infringement, Chinese
penalties can still be rated as a remote and moderate threat, they might strengthen. Meanwhile, the Swiss
ones, underthe Code, are serious.
Research limitations/implications –The paper does not cover other forms of overseas investment
from China, namely, commercial investment. Besides, there is no related jurisprudenceor practice as of yet;
therefore,the findings of the paper need to be tested.
Practical implications –The paper suggests that the compliance officers of Swiss banks should
familiarizethemselves with the specificities of the PRC exchange controlto anticipate the related risks.
Originality/value –Sino-Swiss compliance and bilateral assistance in financial matters are still
uncharteredwaters. Because the Greater China market is of growing significancefor Swiss banks, they might
welcome earlyguidance to avoid repeating their mistakeswith the USA and the EU.
Keywords China, Switzerland, Compliance, Bank deposits, Diligence duties, Exchange control
Paper type Research paper
China maintains a strict exchange control regime,in particular, for outbound investment. It
has recently intensified its crackdown on capital flight. The matter cannot not quite be
dismissed as theoretical as cumulated figures up to the trillions of Chinese yuan
representing a two-digitportion of the Chinese currency reserves are mentioned.
This article discussesthe compliance duties of Swiss banks toward the Chinese exchange
control in case of PRC resident’s deposits.
Specifically, this paper assesses the compliance duties Swiss banks and financial
intermediaries may have, under Swiss law, toward the PRC FOREX[1], i.e. specifically,
under the four core legal and regulatory basis that are the Diligence Code, the Money
Laundering Ordinance of the Swiss Financial Markets Surveillance Authority (FINMA)
(“the OBA-FINMA”)[2],Art. 305bis and ter of the Swiss Criminal Code, and the Federal Law
on Combating Money Launderingand Terrorist Financing (LBA)[3][4].
1. The Diligence Code
The Diligence Code is an auto-regulatory instrument whose primary purpose is to regulate
the opening of bank accounts to theeffect of identifying its holder, its economic beneficiary
JMLC
22,1
62
Journalof Money Laundering
Control
Vol.22 No. 1, 2019
pp. 62-75
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-11-2017-0064
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