Swiss Bank Client Risk Classification: A Comprehensive Guide to AML Compliance

Introduction

Swiss banks are renowned for their robust anti-money laundering (AML) standards, which safeguard both the financial system and the banks’ reputations. Under the rigorous oversight of the Swiss Financial Market Supervisory Authority (FINMA) and in accordance with the Swiss Banks’ Conduct Code, these institutions implement a risk-based approach to client onboarding and monitoring. This article explains how Swiss banks classify clients into low- and high-risk categories, detailing the factors that drive these assessments and outlining the specific restrictions applied to clients from high-risk countries and industries.

High-Risk Client Restrictions

Sanctions, Blacklists, and International Frameworks

Swiss banks strictly enforce international sanctions. They do not accept clients from blacklisted or sanctioned countries, including those listed on Swiss, EU, UK, US, or UN sanction lists. These measures ensure compliance with international regulations and help mitigate risks related to money laundering, terrorist financing, and other illicit financial activities.

Exception for Russian and Belarusian Citizens

An exception exists for Russian and Belarusian citizens under strict conditions. Such clients may be considered if they:

• Hold permanent residency in the EU, UK, Monaco, Andorra, Switzerland, Liechtenstein, or Gibraltar, or possess a second passport from any of these jurisdictions.
• Do not have any business operations or income derived from Russia or Belarus.

Even if these conditions are met, Russian and Belarusian clients are automatically classified as high-risk. They are subject to Enhanced Due Diligence (EDD), which includes comprehensive background checks and continuous transaction monitoring.

Frameworks Identifying High-Risk Countries

Swiss banks identify high-risk jurisdictions using multiple international frameworks and assessments:

1. FATF High-Risk Jurisdictions:
   • “Black List” Countries: These jurisdictions have significant deficiencies in combating money laundering and terrorist financing. The 2025 FATF list includes:
     • North Korea
     • Iran
     • Myanmar (subject to enhanced due diligence but not countermeasures)
   • “Grey List” Countries: These are under increased monitoring but are actively addressing their deficiencies. Examples include South Africa, Nigeria, the Philippines, and Lebanon.
2. EU High-Risk Third Countries:
   The EU identifies additional high-risk third countries for AML purposes. Recent additions include:
   • Algeria
   • Angola
   • Côte d’Ivoire
   • Lebanon
     Other EU-listed high-risk countries include Syria, Venezuela, Yemen, and others already flagged by FATF.

These international assessments are complemented by geopolitical evaluations that consider terrorist financing, political instability, and the overall quality of AML controls.

Client Classification: Low-Risk vs. High-Risk

Swiss banks adopt a structured approach to client classification who applied for a swiss bank account, ensuring that the level of due diligence is commensurate with the risk each client represents.

Low-Risk Clients

Low-risk clients typically have stable financial profiles and transparent sources of income. This group generally includes:

• The potential client must not have any ties to sanctioned or blacklisted countries.
• Andorra, Argentina, Bahamas, Bahrain, Brazil, Chile, Costa Rica, EU, Gibraltar, Hong Kong, Israel, Monaco, New Zealand, Oman, Panama, Qatar, San Marino, Saudi Arabia, Singapore, South Africa, Switzerland, Turkey, UAE, Uruguay or UK residents with stable employment or business activity.
• Retired individuals with predictable financial activity.
• Salaried professionals with no involvement in high-risk industries or exposure to high-risk jurisdictions.

These clients undergo standard Know Your Customer (KYC) procedures, which involve identity verification and routine transaction monitoring.

High-Risk Clients

• Geographic Risk: Clients with ties to high-risk jurisdictions, particularly those with weak AML controls, high corruption levels, or geopolitical instability. The Corruption Perceptions Index (CPI) by Transparency International plays a key role here, with countries scoring below 50 automatically flagged as high-risk.
• Industry Involvement: Clients operating in sectors prone to financial crime.
• Political Exposure: Politically Exposed Persons (PEPs) and their close associates.
• Transaction Behavior: Suspicious financial patterns such as frequent large cash transactions or complex corporate structures.

High-risk clients require Enhanced Due Diligence (EDD). Factors that elevate a client’s risk classification include:

Detailed Risk Factors

1. Geographic Risk: Country of Residence or Business Operations

Swiss banks assess the risk associated with a client’s country of origin or the location of their business activities. The Corruption Perceptions Index (CPI) serves as a benchmark; countries with a CPI score below 50 are flagged as high-risk. Below is a full list of such countries based on 2024 data:

Clients connected to these high-risk jurisdictions are subject to heightened scrutiny and must provide robust evidence of legitimate financial activities.

2. Industry Involvement: High-Risk Business Activities

Certain industries are inherently more vulnerable to financial crimes. Clients operating in these sectors are automatically flagged as high-risk. Key high-risk industries include:

• Weapons Manufacturing & Trade: Including arms dealers and ammunition manufacturers.
• Alcohol & Tobacco Industry: Encompassing producers, distributors, and large-scale retailers.
• Gambling, Betting, and Casinos: Both brick-and-mortar establishments and online platforms.
• Pharmaceuticals: Especially companies involved in controlled substances and international trade.
• Real Estate Agencies: Often exploited for money laundering through property transactions.
• Financial Intermediation: Including private equity, hedge funds, and cryptocurrency businesses.
• Mining & Precious Metals Trade: Involving high-value commodities such as gold and diamonds.
• Cryptocurrency Exchanges & Fintech Companies: Due to the high potential for illicit financial flows.
• Luxury Goods Trading: Involving high-value art, jewelry, and collectibles.

Clients from these sectors must submit detailed financial documentation and undergo continuous monitoring.

3. Political Exposure: Politically Exposed Persons (PEPs)

Politically Exposed Persons (PEPs) and their close associates are classified as high-risk. This category includes:

• High-ranking government officials (e.g., heads of state, ministers, parliamentarians, and senior judges).
• Diplomats and ambassadors.
• Executives of state-owned enterprises.
• Senior military officials.
• Officials in international organizations (e.g., UN, IMF, FIFA, World Bank).
• Close relatives and business partners of PEPs.

Enhanced due diligence for PEPs includes thorough verification of source-of-funds and ongoing transaction monitoring.

4. Transaction Patterns and Financial Behavior

Swiss banks also scrutinize clients’ financial activities. Certain transaction patterns trigger high-risk classifications, including:

• Frequent large cash deposits or withdrawals.
• High-value transactions lacking a clear business rationale.
• Use of tax havens or offshore accounts.
• Complex corporate structures that obscure true ownership.
• Rapid movement of funds between unrelated entities.

Any unusual financial behavior necessitates enhanced scrutiny and may result in an immediate high-risk classification.

Conclusion

Swiss banks enforce robust AML policies to protect their institutions and comply with FINMA regulations. Clients are classified based on geographic risk, industry involvement, political exposure, and transaction behavior. Strict enforcement of international sanctions—including those from the Swiss, EU, UK, US, and UN—ensures that Swiss banks do not inadvertently facilitate financial crimes.

Even in cases where exceptions exist for Russian and Belarusian citizens, stringent conditions apply, and such clients are always regarded as high-risk. This risk-based approach helps Swiss banks maintain their reputation as secure, compliant, and trusted financial institutions in an ever-evolving global landscape.

At Mamytova Consulting, we help potential clients identify their risk profile and carry out comprehensive World Check screenings. We also assist in finding Swiss or Singapore banks that are ready to accept clients based on their specific risk assessments. This service ensures that you understand your compliance obligations and receive guidance tailored to your unique financial profile.