Financial Intermediary
Under Swiss anti-money-laundering law, a financial intermediary is either a prudentially supervised institution such as a bank, securities firm or fund manager, or any other person who on a professional basis accepts, holds or helps transfer assets belonging to someone else. Only the second group joins a self-regulatory organization.
Also called: Swiss financial intermediary
In Switzerland, “financial intermediary” is not a loose description of a middleman. It is a status defined by the Anti-Money Laundering Act, and it attaches to what a business actually does with other people’s assets rather than to what it calls itself.
The status divides into two groups. Banks and FinTech licensees, securities firms, fund management companies, portfolio managers and trustees, certain insurers and DLT trading facilities are financial intermediaries supervised for anti-money-laundering purposes by FINMA itself, under their own sectoral licenses. Everyone else who meets the definition — payment providers, money transfer businesses, asset managers, many crypto firms — falls into the second group, which Swiss practice calls para-banking. A firm there is not licensed by FINMA. It must affiliate with a self-regulatory organization, which supervises its AML compliance in FINMA’s place.
Because that second test is activity-based, a company can become a financial intermediary without setting out to. Holding client funds in an account it controls, exchanging currency for customers, or taking custody of crypto assets on their behalf can each bring a business inside the definition, whatever the contract calls the service. “On a professional basis” is then a threshold question rather than a matter of intent: gross proceeds above CHF 50,000 a year, twenty or more ongoing customer relationships, power of disposal over more than CHF 5 million of someone else’s assets, or transaction volume above CHF 2 million a year. Money transfer counts as professional in every case, unless it is done for a closely related person and earns no more than CHF 50,000 a year.
What follows is a compliance regime: identifying customers, establishing beneficial ownership, understanding the purpose of the relationship, monitoring transactions, keeping records and reporting suspicion.
In practice
Financial intermediary is a defined legal status under Swiss AML law, not a general description of a business that sits in the middle of a payment. Which half of the definition a company falls into is what decides who supervises it: a bank or other prudentially licensed institution is supervised for AML by FINMA itself, while everyone caught by the activity test instead must affiliate with an SRO. Either way the question is answered by the activity, not by the label on the company.
Example
A Swiss company builds a checkout product and argues it is only software. Customer funds, however, land in a bank account the company controls before it pays merchants. Because it accepts and holds third-party assets on a professional basis, it meets the financial intermediary definition, and the software framing does not remove the obligation to affiliate with an SRO.
Commonly confused with
| Term | How it differs |
|---|---|
| Self-Regulatory Organization | Financial intermediary is the status a business holds; SRO membership is the supervisory consequence of holding it. |
| FINMA | FINMA is the Swiss supervisory authority; financial intermediary is the AML status that determines whether a firm is supervised by FINMA directly or through an SRO. |
See also
- Self-Regulatory OrganizationIn Switzerland, a self-regulatory organization is a FINMA-supervised body that admits and monitors financial intermediaries for anti-money-laundering purposes. Membership is the supervision route for intermediaries that do not hold, and do not need, a full FINMA license.
- FINMAThe Swiss Financial Market Supervisory Authority, Switzerland’s integrated financial regulator. FINMA licenses banks, securities firms and fintech licensees, and authorizes and oversees the self-regulatory organizations that supervise other financial intermediaries for anti-money-laundering purposes. Most payment firms in Switzerland therefore deal with an SRO rather than with FINMA directly.
- Anti-Money LaunderingAnti-money laundering, usually shortened to AML, is the body of law, regulation and internal controls requiring financial firms to detect, prevent and report attempts to disguise the origin of criminal proceeds. It is an obligation placed on the firm, not a product the firm can buy.
- AML ProgramAn AML program is the documented set of controls a regulated firm must maintain to detect and deter money laundering. In the United States it is conventionally described as four pillars: written policies and procedures, a designated compliance officer, staff training, and independent review. Other regimes frame the same components differently.