The PRC exchange control-related
compliance duties of Swiss banks
towards PRC residents’deposits
Meyerlustenberger Lachenal, Geneva, Switzerland
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, 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”),Art. 305bis and ter of the Swiss Criminal Code, and the Federal Law
on Combating Money Launderingand Terrorist Financing (LBA).
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
Journalof Money Laundering
Vol.22 No. 1, 2019
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