Switzerland

Emiliano Heissel, Compliance Specialist and Dr Lea Meyer, Head of Legal and Compliance at Loterie Romande, provide an update of Swiss national regulations, and the key AML measures currently in place at the lottery. It aims to inform rather than prescribe guidelines for other countries.

It is not enough for WLA member lottery and sports betting operators to be innovative and competitive. They are obliged to offer their games in regulatory environments that constantly call for the balancing of commercial, legal and social objectives.

Since the entry into force of the Federal Gambling Act on 1 January 2019, lottery and sports betting operators in Switzerland have had to consider the obligations with regard to Anti-Money Laundering (AML). This report summarises the experience of the Loterie Romande over the last five years, since this new legal obligation came into force.

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This document will refer to lottery and sports betting operators or simply to operators. These terms are used synonymously to simplify the reading of the text.

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Executive summary

Since 2019, Swiss lottery and sports betting operators have been complying with AML requirements. The compliance programme that aims to uncover suspicious activity associated with money laundering is extensive and, as will be shown in this document, complex in its implementation, requiring additional financial and human resources. In total, very few activities were detected that required communicating to the federal office in question, and the administrative load associated with the legal obligations is heavy. The Swiss legislator decided that all types of games proposed by Swiss operators must be subject to AML due diligence; some distinctions were made between the risk associated with ML and separating offline and online games.

As explained in Chapter 2, identity verification can be carried out in many ways (in-person, online, via real-time audio-visual communication, by consulting a trusted privately managed database, or by making sure that the player holds a Swiss bank account). For offline games, the legislator set low thresholds for winnings on electronic lottery games, sports and horse betting, medium thresholds for winnings on scratch cards, and higher thresholds for winnings on draw games. For online games, winning thresholds are determined not only by the amount won, but also by the proportion of money wagered on games that exceed a certain payout ratio. The amount of money deposited or withdrawn on the player’s online account was also taken into consideration by the legislator for thresholds applicable to online games.

Besides verification of the player’s identity, AML obligations require the identification of the beneficial owner who ultimately has the power to dispose of the winnings realised by the player and/or of the funds invested to acquire the game. As explained in Chapter 3, with offline winnings, identification of the beneficial owner must be done at the same time as the verification of the identity of the player. With regard to the online player, identification must be carried out, for example, where the operator knows or suspects that the player is not the beneficial owner, or if unusual behavior is detected.

As outlined in Chapter 4 and Chapter 5, Swiss operators have had to define their AML monitoring programme for business relationships and transactions and set criteria determining when they are exposed to high risks. The risk approach is also applicable in this case, as the legislator set different thresholds above which a transaction or business relationship must be considered as carrying high risks. Finally, operators have had to establish enhanced due diligence procedures for clarifying the economic background of the business relationship or transaction.

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Chapter 1: Setting the scene

Since the entry into force on 1 January 2019 of the Federal Gambling Act of 29 September 2017 (GamblA, SR 935.51), Swiss lottery and sports betting operators have been subject to the AML Act of 10 October 1997 (AMLA, SR 955.0). The Federal Gambling Act has led to an adaptation of the AMLA in the sense that operators of large-scale games are now considered to be financial intermediaries under this act. The due diligence obligations of large-scale gambling operators are based on both the general provisions of the AMLA and the special provisions of the Federal Gambling Act. The definition of the due diligence obligations of large-scale gaming operators is the responsibility of the Federal Department of Justice and Police (FDJP), which has issued the Ordinance on the Due Diligence Obligations of Large-Scale Gaming Operators in the Fight against Money Laundering and Terrorist Financing of 7 November 2018 (OAML-FDJP, SR 955.022).

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Two authorities are important in regard to AML obligations for Swiss lottery and sports betting operators – the Swiss Gambling Supervisory Authority (GESPA) and the Money Laundering Reporting Office Switzerland (MROS).

GESPA, the regulator for lottery and sports betting operators in Switzerland, also ensures that operators of large-scale games hold the mandatory authorization and comply with the legal requirements set forth in the OAML-FDJP and the Federal Gambling Act.

MROS is better known internationally as the Swiss Financial Intelligence Unit. It is attached to the Federal Office of Police (fedpol) and subject to the Money Laundering Reporting Office Switzerland Ordinance (MROSO, SR 955.23). MROS principally acts as a relay between financial intermediaries and the prosecuting authorities. It receives and analyses suspicious activity reports in connection with money laundering, terrorist financing and money of criminal origin or criminal organizations made available by financial intermediaries (including lottery and sports betting operators), supervisory authorities (including GESPA and the Swiss Federal Gaming Board) and other entities subject to the AMLA. When a report is received, MROS performs investigations on its own and decides whether or not to pass on the information collected to the federal or cantonal prosecutors’ offices. If the report is forwarded to the prosecuting authority, the financial intermediary who submitted it is notified¹.

Chapter 2: Identity verification

One of the most important due diligence principles for assuring compliance with the AMLA is the KYC (“Know Your Customer”) principle. The first step is to identify the person with whom the financial intermediary intends to start (or holds) a business relationship. In some cases, even for single transactions, the financial intermediary must identify his business partner. Identity verifications obligations are provided for by Article 3 of the AMLA and, for lottery and sports betting operators, they are specified in Article 3 and Article 4 of the OAML-FDJP.
The Swiss legislator decided to distinguish offline games from online games, so the due diligence requirements for identity verification of players are slightly different. The procedures for verifying identity, which are specified by Article 6 and Article 7 of the OAML-FDJP, remain the same for both online and offline players.

Methods for verifying identity

There are different ways of verifying the identity of a player:

1. In-person identification. This occurs e.g. when a player comes personally to the offices of the operator to claim winnings. The player’s identity can be verified by consulting the original, or a certified copy of, an official identity document in plain text bearing a photograph, such as a passport, identity card or driving licence. The operator keeps a copy of the identification document (front and back side) or the certified copy. Additionally, the person who carried out the identification for the operator must sign, and date the verification, and include a remark confirming that he/she has seen the original. This proof of verification is then stored by the operator electronically or in paper form.
2. Video identification. Identification is made via a real-time (i.e. live) audio-visual communication between the player and the operator. This kind of identification requires the implementation of significant technical and security measures. Technical constraints can for the most part, be overcome by offering this type of identification via a certified video identification provider.
3. Online identification. Player access to an online tool is made available by the operator and follows various steps for identification, which includes taking photos of the players (biometric identification) and of their personal identity documents. As with video identification, online identification requires significant technical and security implementation measures. The alternative is to make this service available via a certified provider of online identification.
4. Trusted privately managed database. Another way to identify the player is to consult and record in electronic form an electronic extract of the database of a trusted privately managed database company. Although this is a valid option for verifying the identity of a player, the fact that information about the player may be missing on this database or that there may be discrepancies with evidence collected by the operator mean that an alternative identity verification method (amongst those described in this section) is preferable.
5. Proof of a Swiss bank account. Instead of identifying the player by one of the aforementioned methods, the operator can consult and store electronically or in paper form the copy of a document certifying that the player holds a personal Swiss bank account. The player can provide the operator with this document either physically (in person or by post) or electronically (a simple e-mail is sufficient). Where this method is chosen, Swiss operators ask players for a simple copy of their identity document as additional evidence. This double document identification is therefore equivalent to in-person identification.

Whichever method is chosen for identity verification, the minimum information required for the operator to register in its system is the player’s first name, surname, date of birth, nationality and full residential address.

Responsibility for identity verification as part of AML due diligence lies with the lottery and sports betting operator. It cannot be delegated to the operator’s retailers (point of sales), who will never be required to identify players for and on behalf of the operators.

Identity verification for large-scale offline games

The identity of a player who plays offline (in the field, at one or more points of sale), must only be verified when the player wins a certain amount of money for a set type of game. The threshold for verifying the identity of the player depends on the amount of the winnings (gross amount) and the type of game played.

For the sake of clarity, the following table shows the thresholds applicable for the various games. In the case of winnings exceeding the indicated amount, the identity of the player must be verified before any payout, meaning that the player will receive their money only after having been identified.

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Under certain conditions, the threshold is CHF 25,000, such as for games that are not electronic lottery tickets, scratch tickets or sports betting and where the payout rate is less than 70% (e.g. EuroMillions).

Once the identity of the player has been verified, the player should be screened for their PEP status as required by Article 15(2) of the OAML-FDJP and according to definitions of PEPs in Article 2a of the AMLA. PEPs are politically exposed persons who exercise an important public function and who, because of their predominant function, generally present a higher risk of corruption because of their position and the influence they can exert (even family members of the PEP or close associates have to be treated as PEPs). If the player is a PEP, he/she may be subject to enhanced due diligence as outlined in Chapter 5. Otherwise, the winnings can be paid.

In the event of another win that also exceeds one of the thresholds needing identity verification, players whose identities have already been identified do not need to have their identity verified again.

With the entry into force of the amended AMLA on 1 January 2023, financial intermediaries such as lottery and sports betting operators are obliged to periodically check if the required AML records of their clients (for operators, clients are referred to as players) are up to date, and update them if necessary. Following the risk approach upheld in law², Swiss operators are free to determine when and in what situations they verify again the identity of a player who has been correctly identified in the past.

Identity verification for large-scale online games

Unlike offline games, online games are characterized by a lasting business relationship between the player and the operator, as the players will have their personal online account for making deposits used to make wagers. Players are therefore known from the beginning, even if their identities hav1e not yet been formally verified from an AML point of view.
The thresholds above which verification of the identity of players becomes compulsory are therefore different from those applicable to offline games, and include not only winnings, but also deposits and withdrawals of money from players’ online accounts. Since the business relationship is continuous, thresholds are not calculated on a single operation, such as a single win, but are aggregated over a period of time, which is 30 days for thresholds applicable to the identity verification obligation.

For the sake of clarity, the following table shows the thresholds applicable to all online games.

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• In the case of account deposits, the identity of the player must be verified when CHF 15,000 or more are deposited in the player’s online account in a period of 30 days or less.
• In the case of winnings, the applicable threshold differs with regards to the percentage of wagers that the player allocates to games with a payout ratio of 70% or more. Only winnings directly credited³ to the player’s bank account and withdrawals ordered by the player are considered in the total calculation applicable to these thresholds. Small winnings that remain in the player’s online account are not included in the total amount of winnings. This means, for example, that a player who, in a period of 30 days, wagers a total of CHF 5,000 on horses and a total of CHF 15,000 on online draw games (assuming that the payout ratio for horse betting is >70%, and <70% for draw games) and wins a total of CHF 24,000 will not have to have their identity verified (because in this case, the threshold is CHF 25,000). The same player betting a total of CHF 5,000 on horses and a total of CHF 5,000 on online draw games and winning a total of CHF 11,000 will have to have their identity verified by the operator (because here the threshold is CHF 10,000). This is due to the risk approach, the important principle followed by the AML legislation.
• Players closing their online accounts containing CHF 5,000 or more must have their identity verified.
• When at least CHF 5,000 are transferred from the player’s online account to the player’s bank account and this amount does not come from winnings, the player’s identity will be verified.

As is the case for offline games, in online games a PEP screening must be carried out on players once their identity is verified. This is required by Article 16(2) of the OAML-FDJP. If the PEP status of the player is confirmed, this could lead to the business relationship being subjected to enhanced due diligence measures, which are presented later in Chapter 5.

PEP checks are typically performed by operators through external KYC solution suppliers, whose due diligence screening tools usually include modules for checking whether an individual or corporation has been convicted of particular crimes, is subject to international sanctions, or is associated with negative news from blogs, websites, social media, television, radio, etc. Thus, when performing PEP checks, operators are screening players for a wider range of AML risks, which could, for example, make it possible to detect that the player claiming a winning scratch ticket (and requiring identity verification) has criminal record for supporting a criminal organization.

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Chapter 3: Identification of the beneficial owner

Another compliance due diligence measure in the fight against money laundering and terrorism financing (ML/TF) is verification of the identity of the beneficial owner (BO). Some situations where the player might not be the beneficial owner are:

• In the case of both offline and online gaming, the player could play with money from members of his family or friends and share winnings with them. In this case the BOs are the player and anyone else who participated in the game.
• In the case of a married couple, under the regime of community of accrued gains, the winnings of one spouse are the winnings of the couple. Here, there are therefore two BOs.
• Where a person is mandated to play money for and on behalf of a mandator, the mandate is simply the player who, in case of a win, has rendered the money won to the mandator. In this case, the BO is different from the player.
• A person without income or wealth (e.g. a university student) plays online. In this case, the BO should be identified (e.g. the mother/father of the student).

For the purposes of identifying the BO, the operator must ask the player for a written declaration that identifies the BO (the first name, surname, date of birth, nationality and residential address of all BOs must be provided). Information given by the player must be plausible, something that is possible only if the player can explain the economic link with the BO. Even if not requested by law, Swiss lottery and sports betting operators generally ask, as corroborating evidence, for a copy of the identity document of all additional BOs and documents proving that the BOs hold a personal Swiss bank account.

As is the case for verifying player identities, once BOs are identified, their PEP status is checked and, in the event of a positive result (and under certain circumstances), the entire relationship (not only the BO who is a PEP) is submitted to enhanced due diligence measures, as explained later in Chapter 5.

When the BO is identified

As is the case for verifying the identity of players (outlined in Chapter 2), different procedures apply to offline and online games. Those differences are once again explicable by the type of business relationship with an offline or online player. Offline players enter a business relationship with the lottery and sports betting operator only when they claim their winnings. In this case, the business relationship consists of a single transaction. By contrast, online players are in a long-term business relationship with the operator, as they have an online player account. In the latter case, the operator has sight of all transactions made by the players involving their accounts.

Large-scale offline games

In the case of offline games, the rule is quite simple: the BO must be identified at the same moment the identity of the player is verified. The table in Chapter 2 for offline games is therefore suitable for both the verification of the player’s identity and the identification of the BO.

Large-scale online games

In the case of online games, the rule is more complex, since identification of the BO must take place, no later than when thresholds for verification of the player’s identity are reached, but only (the conditions below are not cumulative):

• If the lottery and sports betting operator knows or suspects that the player is not the BO (Article 9(b)(1) and Article 9(b)(2) of the OAML-FDJP):
  • in reality this condition almost never occurs, as the only information about the player collected by the operator at this stage is limited to identity data and bank account evidence;
  • if the bank account entered in the player’s account does not match the bank account evidence provided for the identity verification, and if the player does not modify the bank account or is unable to prove that the bank account belongs to him/her, the operator could, in this case, reasonably suspect that the player is not the BO and ask the player for the written declaration on beneficial ownership.
• If the lottery and sports betting operator notices unusual behavior when interacting with the player (Article 9(b)(3) of the OAML-FDJP):
  • this condition is possible but rare, as at this stage the only contact with the player has been a letter asking for his/her identification documents;
  • some unusual behavior is still detectable by the way players play. For example, a player who has always wagered small amounts of money on online scratch cards, but who suddenly starts wagering large amounts on sports betting, could be seen as exhibiting unusual behavior. This would lead to identification of a BO or, if the BO has been identified in the past, to a repetition of the verification of the BO. In some cases, detection of unusual behavior could even lead to enhanced due diligence measures, which we outline in Chapter 5.
• If GESPA informs the operator about a specific player (Article 9(b)(4) of the OAML-FDJP)
• Ifthe lottery and sports betting operator has sufficient grounds to suspect that ML/TFmay have taken place (Article 9(b)(5) of the OAML-FDJP).

Chapter 4: Monitoring of business relationships and transactions

As a part of a performing and effective anti-money laundering system, Swiss lottery and sports betting operators must develop their own monitoring programmes for business relationships and transactions. These consist of defining when a relationship or a single transaction must be subject to simplified Compliance Due Diligence (“CDD”) or Enhanced compliance Due Diligence (“EDD”) measures. To define this programme, the operator should follow a risk-based approach, according to which the higher the risk represented by the business relationship or transaction, the more detailed the information about the player and the economic background of the relationship or transaction must be, and the greater the frequency of additional checks carried out on that person and/or relationship.

Although the law leaves the operator some leeway in terms of implementing its personal monitoring programme, it requires the operator to assign its business relationships to four different categories, depending on the risk of ML/TF that they present. It also lists some criteria to be considered when assigning business relationships to these four categories, and defines situations where the relationship or transaction is deemed to entail a high risk of ML/TF and therefore subject to EDD. This chapter summarizes these criteria and conditions – set forth in Article 12 to Article 17 of the OAML-FDJP – where a business relationship or transaction is deemed to present a high risk of ML/TF.

The rules that determine when the identity of the player must be verified and when a business relationship or a single transaction must be considered a high-risk exposure to ML/TF are extensive and complex. They require the operator to deploy advanced IT systems capable of the automatic detection and monitoring of transactions that could incur increased risk. This condition is set out in Article 20(3) of the OAML-FDJP, which leaves it to GESPA to decide whether to require the operator to deploy a digital transaction monitoring system, if deemed necessary for effective monitoring.

The law even declares (Article 20(2) of the OAML-FDJP) that an efficient transaction monitoring system be in place when:

• for offline games, all winnings exceeding CHF 15,000 are monitored⁴ and documented;
• for online games, all transactions concerning players’ online accounts, including winnings directly credited to players’ bank accounts not transiting on players’ online account, are monitored and documented.

Criteria for determining the risk associated with a business relationship or transaction

The following criteria should be taken into consideration and adapted to the operator’s business model for defining the risk presented by the business relationship with the player (in offline gaming, where no long-term business relationship exists, a single transaction is considered as a business relationship):

• The country of residence of the player or BO
  • this criterion is applicable to offline players, and only in very particular situations to players’ online accounts, where the BO does not live in Switzerland⁵;
  • when defining this criterion, the operator should consider the money laundering risk exposure of the country (including terrorism risk, corruption risk and the presence of the country in internationally approved sanction lists, such as the Financial Action Task Force (FATF) high-risk jurisdictions list). An offline player whose country of residence is on the high-risk jurisdiction list should, for example, be considered a high-risk player and be subject to EDD;
• The nationality of the player or BO
  • this criterion, applicable to both online and offline business relationships, is similar to the previous one regarding the country of residence, but concerns the citizenship of the person;
• The PEP status of the player or BO
  • business relationships with PEPs may represent increased risks due to their predominant position that may lead them to abuse their power and influence for personal gain or advantage, or for the personal gain or advantage of close family members and close associates;
  • if the players or BOs are foreign PEPs, the business relationship with them as a player or BO is deemed high-risk;
  • business relationships with Swiss (domestic) PEPs (e.g. Swiss prosecutors, the director of the Swiss National Bank, high-ranking officers of the Swiss Army, members of the Federal Council, the director of state-owned armaments company RUAG, etc.) and PEPs in international organizations (e.g. individuals with a prominent function in the International Olympic Committee, FIFA, the United Nations, the World Trade Organization, etc.) are deemed to present a higher risk when combined with one or more risk criteria;
• The type and place of the business activity of the player or BO
  • this criterion aims to define a business relationship (online or offline) as a high-risk relationship when the type of business or profession is more prone to illegal activities, such as mining, the oil industry, tobacco trading, adult entertainment, etc.;
• The type of products solicited
  • sports betting tends to present a higher risk of money laundering compared to draw games or scratch tickets, since it can be more easily manipulated;
• The amount of money deposited on the player’s online account;
• The amount of money won or refunded to the player’s bank account;
  • the country of origin or destination of frequent transactions – similarly to other criteria mentioned above, some countries are more prone to money laundering, illegal activities and tax evasion, than others;
• Significant fluctuations in the type, volume or frequency of transactions (deposits, wagers placed and withdrawals) usually undertaken by the player;
• Significant deviations in the type, volume or frequency of transactions usually undertaken by other players in similar situations.

Swiss lottery and sports betting operators are free to define, within the parameters of the aforementioned list, their own criteria that help determine if a business relationship carries a higher risk and needs EDD measures to mitigate risks. That said, the law defines certain precise rules that clearly state which business relationships and transactions always carry high risks.

In contrast to what is contained in Article 13(3) of the Ordinance on the Due Diligence Obligations of Casinos in the Fight against Money Laundering and Terrorist Financing of 12 November 2018 (CFMJ-OAML, SR 955.021), the OAML-FDJP (the ordinance applicable to lottery and sports betting operators) does not specify that business relationships involving a person, a resident in or being a national of a jurisdiction judged by FATF to be high-risk, or of a country subject to international sanctions based on the Federal Embargo Act (EmbA, SR 946.231), should be classed as high-risk. Moreover, it can be argued that the country of residence presents a higher risk than the simple nationality of a person, since citizenship alone is rarely a pertinent AML criterion. It could be a risk criterion, but only in connection with tax risks/obligations. It therefore depends on the business activity of the financial intermediary as to whether and how important the nationality risk is.

High-risk business relationships and transactions for large-scale offline games

In addition to the aforementioned criteria for determining the risk presented by a business relationship or transaction, the law specifies that winnings in offline games that reach or exceed CHF 100,000 (aggregated value of winnings in a 365-day period⁶) are always to be considered as carrying high risks. When this happens, EDD measures must be taken with the aim of mitigating the ML/TF risk.

Moreover, an offline business relationship with a foreign PEP (including close relatives and associates) as a player or BO always carries a higher risk when a threshold is attained.

High-risk relationships and transactions for large-scale online games

In the case of online games, a business relationship presents high ML/TF risks if, during a period of 365 days:

• at least CHF 30,000 are deposited in the player’s account;
• at least CHF 100,000 in winnings are credited to the player’s bank account⁷ if during these 365 days half or less than half of the player’s wagers are on games with a payout ratio ≥ 70%;
• at least CHF 40,000 in winnings are credited to the player’s bank account if during these 365 days more than half of the player’s wagers are on games with a payout ratio ≥ 70%;
• at least CHF 20,000 available in the player’s online account have to be transferred to the player’s bank account because of the closure of the online account;
• at least CHF 20,000 are transferred from the player’s online account to the player’s bank account and this amount does not come from winnings.

The interpretation of the application of the thresholds listed above for defining high-risk relationships or transactions is similar to that explained in Chapter 2 concerning identity verification in the case of large-scale online games.

Furthermore, an online business relationship with a foreign PEP (including close relatives and associates) as player or BO always carries a higher risk.

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Chapter 5: Enhanced Compliance Due Diligence (EDD) measures

According to Article 11 of the OAML-FDJP, which refers to Article 6(2) of the AMLA, Swiss lottery and sports betting operators are committed to initiating EDD processes that serve to clarify the economic background of the business relationship or transaction:

• when faced with a high-risk business relationship or transaction as outlined in the previous chapter;
• when the transaction or the business relationship appears unusual, unless its legality is clear;
• when there are indications that assets are the proceeds of a felony⁸ or an aggravated tax misdemeanour under Article 305bis(1bis) of the Swiss Criminal Code (SCC, RS 311.0) or are subject to the power of disposal of a criminal or terrorist organization (Article 260ter SCC) or serve the financing of terrorism (Article 260quinquies(1) SCC);
• when the data on a player or a BO in a business relationship or transaction is identical or very similar to the data passed on to the financial intermediary by GESPA.

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What must be clarified when an EDD process is initiated depends largely on the risk presented by the business relationship or transaction. The most common measures to determine if the economic background is legitimate, in accordance with Article 18 and Article 19 of the OAML-FDJP, can be summarized as follows:

• The BO will be identified or re-identified:
  • if not already done;
  • where the operator has doubts that the real BO is the one declared by the player;
  • if identification occurred some time ago and the operator has internal policies stating that identification shall be repeated after a determined period of time, which can depend on the risk presented by the business relationship.
• In some cases, if the player is not the declared BO and the economic link between the player and the BO is weak, the player will have to submit more precise written/oral clarifications or some corroborating documents.
• The Source of Funds (SoF) will be clarified and the origin of the money used by the player for financing their wagers explained. For the purposes of SoF clarification, typical questions include: where does the money come from for a particular transaction or set of transactions or for financing the entire business relationship? How and where did the player come by that money?
  In the case of online games, where the money circulates through payment method providers from payment apps, credit and debit cards linked to bank accounts and is not directly credited to the player’s online account from a classic wire transfer⁹ revealing details of the ordering party. Operators are accustomed to asking players more questions regarding the SoF, since the SoF is defined as the origin of the money used for playing – something that is difficult to determine. Players must therefore state if the money used for the wagers originates from: their revenues and earnings, social or pension payments, interest from personal savings, returns on investments, money from property sales, inheritance and gifts, or legitimately won money, such as that received from casinos or lottery and sports betting operators. To better understand the economic background of the player, questions about the employment status, commercial or professional activity and the amount of revenues are always asked.
  In the case of offline games, the SoF remains completely unknown since the player places wagers at points of sale. In this case, as for online accounts, the operator asks players submitted to EDD measures to declare their SoF. The player will then answer the same questions asked to online players.
  SoF questions are put to the player who is the contracting party with the operator, but they concern all BOs of the business relationship. Answers to SoF questions can be collected orally or in writing.
• The Source of Wealth (SoW) will be determined. To clarify how players have accumulated wealth over time, typical questions asked of the player include: what is the total wealth of the player? How did the player and/or BO accumulate the wealth over time? What does their wealth consist of (e.g. savings from earnings, investments, real estate, inheritance and gifts, winnings from casinos and operators). SoW information can be collected orally or in writing.
• Public sources and databases, like Zefix (the main database for Swiss companies registered for commercial purposes) and Google will be consulted (these kinds of searches facilitate the detection of potential negative information on the players and/or BOs, but they can also serve to confirm statements made by the players e.g. as to their professional activity).
• Trustworthy private individuals could be consulted, like point of sales staff for offline games.

According to Article 18(2)(a) of the OAML-FDJP, the operator facing a high-risk relationship or transaction must proceed to simplified EDD measures, consisting of the identification of the BO, if it knows that the player has wagered a maximum of only CHF 10,000 over a period of 365 days, or where there is no evidence to suggest it. This can be easily determined for online games, since the operator has an overall picture of transactions occurring on the player’s online account, but hard to ascertain when the player plays offline, since winnings under a certain amount can be directly paid out by points of sale and are not associated with a specified player.

If players’ declarations are plausible and in line with their online account and/or offline transactions, no further details are asked of the player. If not, players could be invited to back up their assertions with evidence, such as salary statements, bank account statements, etc. or provide information in person at the operator’s headquarters.

If EDD measures do not allow the operator to mitigate the risk that the money waged by players comes from an illegitimate source, if players cannot back up their statements with evidence or do not want to collaborate with the operator to make clear the economic background of the transaction or business relationship, the operator has the right to terminate the business relationship. This has the consequence that for a certain period, and as long as the economic background of the business relationship is deemed implausible by the operator, the player will not be able to open an online account with the operator or claim offline winnings.

If EDD measures reveal signs of money laundering, terrorist financing or other offences linked to money laundering, or cannot eliminate the suspicion that the wagered money comes from illegitimate sources, the operator may have to file a report with the MROS under Article 9 of the AMLA (duty to report) or Article 305ter(2) of the Swiss Criminal Code (right to report). If a report is filed and sent to the MROS, the operator will have to wait a maximum of 40 days before terminating the business relationship with the player. During this period, the MROS will conduct its own investigations and will then decide to forward the report to the competent prosecution authority. In the latter case, the operator will be informed and, pursuant to Article 10(1) of the AMLA, must freeze the assets (claimed winnings and/or assets in the player’s online account) that are related to the report. The freezing of assets lasts until the response from the prosecution authority, but at most, for five working days from the date on which MROS gives notice to the operator that it has transmitted the reported information (Article 10(2) AMLA).

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Conclusions

When establishing legal provisions to reduce the risk of money laundering in the gambling sector, the Swiss legislator has clearly recognized that for lottery and sports betting operators, a risk-based approach had to be followed to prevent operators from incurring disproportionate administrative burdens in relation to relatively low risk of money laundering. Operators were therefore obliged to adopt certain due diligence measures when the AML risk presented by a player is more significant. Accordingly, it has been decided to require the operator to verify the identity of the player when winnings occur and the amount of the winnings exceeds a certain threshold, and, for online games, also when substantial deposits are made on the player’s online account.

In pursuing this risk-based approach, the legislator has also considered the specific characteristics and risks of the various games offered by the operator. The same approach has also been adopted for defining increased AML risk and the extent of enhanced due diligence measures to be put in place, which must be appropriate to the risk presented by the business relationship.

However, unlike other countries such as Italy¹⁰, the Swiss legislator has not decided to exclude certain categories of games. All winnings, including winnings from scratch cards or draw games, are therefore subject to due diligence measures, above certain thresholds, even though the risk of money laundering is close to inexistant, as the outcome of the game depends purely on chance and the chances of winning are extremely low. Consequently, there can be no real risk of money laundering associated with these games.

The decision was taken not to exclude certain categories of games but to assign them many different thresholds depending on the distribution channel (online or offline). The identity of the player and/or of the beneficial owner have/has to be verified and above which an increased AML risk is triggered if the threshold is exceeded, and this has finally generated significant administrative burden.

^{1 MROS, https://www.fedpol.admin.ch/fedpol/en/home/kriminalitaet/geldwaescherei.html}

^{2 The AMLA states in Article 7(1bis) that “the periodicity, scope and type of checking and updating are based on the risk posed by the customer”.}

^{3 Article 21 of the OAML-FDJP requires that winnings from online games exceeding CHF 1,000 must be directly credited to the player’s bank account, without transiting through the player’s online account.}

^{4 This criterion is of great importance for calculating the threshold that defines whether a series of wins in a 365-day period involving offline games should be considered a high-risk business relationship.}

^{5 Article 47(3) of the Swiss GamblingOrdinance only allows Swiss operators to open online accounts for players not residingin Switzerland.}

^{6 According to Article 20(2)(a) of the OAML-FDJP, only winnings exceeding CHF 15,000 are considered for the total calculation of this threshold.}

^{7 Only winnings directly credited to the player’s bank account and withdrawals ordered by the player are considered in the total calculation applicable to the threshold. Small winnings that remain in the player’s online account are not counted in the total amount of winnings.}

^{8 Felony is described within the meaning of Article 10(2) SCC (i.e., an offence punishable by a custodial sentence of more than three years). Typical economic offences, which are examples of felonies within the above-mentioned meaning are misappropriation, theft, fraud, aggravated criminal mismanagement, bankruptcy and debt collection felonies, participation or support to a criminal or terrorist organization, active and passive bribery of Swiss or foreign public officials.}

^{9 For the time being, players’ online accounts cannot be funded by cash deposits or wire transfers from bank accounts, as they are not accepted by lottery and sports betting operators, even though they are not prohibited by law.}

^{10 see DECRETO LEGISLATIVO 21 novembre 2007, n. 231, art. 1, al. 3, let. a https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.legislativo:2007;231. Last visited: 28.02.24.}