FINMA Flags Remaining Gaps in Anti-Money Laundering Risk Assessments Despite Industry Progress

Key Takeaways

• Industry Progress Recognized: FINMA found that many banks have improved their definition of risk tolerance and the overall structure of their money laundering risk analyses since Guidance 05/2023.
• FinIA Institutions Also In Scope: While generally facing lower risks, FinIA institutions are expected to apply the same methodological principles used by banks when preparing money laundering risk analyses.
• Risk Appetite Weaknesses Remain: FINMA identified cases where institutions failed to explicitly exclude certain countries, client segments, products, or services, or where exclusions were not aligned with the firm's business model.
• Methodological Deficiencies Persist: The regulator found that some institutions continue to apply risk assessment methodologies incorrectly, reducing the effectiveness of their analyses.

Deep Dive

The Swiss Financial Market Supervisory Authority (FINMA) has published supplementary guidance on money laundering risk analysis, acknowledging improvements across the financial sector while warning that significant weaknesses remain in how some institutions assess and manage financial crime risk.

The guidance builds on FINMA's Guidance 05/2023 and follows a renewed review of money laundering risk analyses conducted at more than 30 banks previously inspected in 2023, alongside assessments of numerous other banks and institutions supervised under Switzerland's Financial Institutions Act (FinIA).

The regulator said banks have made measurable progress since its earlier guidance was issued, particularly in defining risk tolerance and improving the overall structure of their risk analyses. FINMA also noted that some FinIA institutions have voluntarily adopted elements of the 2023 guidance, despite it not being written specifically for them.

According to FINMA, the same methodological principles that govern the preparation of money laundering risk analyses for banks are equally relevant for FinIA institutions, although the level of detail may differ because such firms generally face lower money laundering risks.

Progress Made, but Weaknesses Persist

While recognizing improvements, FINMA said its latest review uncovered recurring shortcomings that continue to limit the effectiveness of risk analyses as management tools.

Among the issues identified were situations in which institutions had not explicitly excluded certain countries, client segments, products, or services from their risk appetite frameworks. In other cases, exclusions existed but were not sufficiently aligned with the institution's actual business model.

The regulator also found instances where firms failed to apply methodological principles correctly when conducting their risk assessments.

These deficiencies, FINMA suggested, reduce the value of risk analysis as a practical tool for directing anti-money laundering resources and controls.

Risk Analysis as a Strategic Control Framework

The regulator used the publication to reiterate the central role that money laundering risk analysis plays within a financial institution's governance and risk management framework.

According to FINMA, a risk analysis is not merely a compliance exercise. It serves as a foundational management tool that establishes an institution's risk tolerance and provides binding guidance for the design, organization, and daily operation of its anti-money laundering framework.

By defining risk appetite and informing control structures, the analysis helps ensure that resources, processes, and monitoring activities are aligned with identified risks while supporting compliance with regulatory obligations.

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