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Swiss Financial Regulator Announces New Rulings to Boost Fintech

by Fintechnews Switzerland March 24, 2016

The Swiss Financial Market Supervisory Authority (FINMA) has announced new rulings aimed at reducing obstacles for fintech startups and allow the industry to flourish.

FINMA has released a new circular on video and online customer identification (FINMA Circ. 2016/7) allowing financial intermediaries to onboard clients by means online and video transmission, putting these means of identification on the level of in-person identification.

According to FINMA, the new ruling will allow digital business to prosper and reduce regulatory barriers that innovative businesses face.

The circular provides details on how financial intermediaries must conduct online and video identification in order to comply with AML/KYC due diligence requirements.

For instance, in the case of a video identification, the financial intermediary needs to set a live video chat with the client. Prior to the video communication, the financial intermediary needs to have his and her permission to conduct a video chat, as well as for the audio recording of the communication.

During the video chat, the financial intermediary needs to take several photographs of the client as well as photographs of his or her identification documents, which can be sent electronically and digitally signed by the client.

New licensing category and exemption

In addition to the new circular on online identification, FINMA has released a statement highlighting its support for the implementation of a new licensing category for financial innovators.

The new licensing category would be dedicated to business models that carry out some banking activities, but that have limited acceptance of client assets and no lending activity.

“Because the risks are lower and the scope of business limited, the licensing requirements would be less extensive than for a banking license,” FINMA said.

For instance, the new license would be required for financial services providers that do not accept more than CHF 50 million in deposits, provided they hold 5% of the deposits and at least CHF 300,000 capital as collateral.

The licensing would carry many advantages for innovative businesses and provide a more flexible regulatory framework for businesses that do not operate on the same scale as traditional banks and that offer limited financial services.

FINMA hopes that the issuance of such licenses would allow the domestic fintech scene to flourish by allowing new entrants and innovative businesses to apply for licenses that are more suitable with their business models. Businesses such as providers of payment systems, applications for managing assets digital and crowdfunding platforms, are particularly targeted for this licensing category, FINMA said.

On the other hand, a fully license-exempt environment is also considered, most particularly for startups up to a deposit threshold of CHF 200,000 and irrespective of the number of depositors.

FINMA said it was currently discussing a range of ideas with the banking sector and the competent authorities to set up rulings that would encourage innovation and competitiveness in the Swiss financial marketplace.

Featured image credit: Freepik