A Swiss correspondent bank receives a transaction-monitoring alert. The respondent bank is domiciled in a jurisdiction where beneficial-ownership disclosure is limited. One ultimate account holder cannot be fully identified. The Swiss correspondent must decide: maintain the relationship, restrict it, or terminate it entirely. Under SECO (the State Secretariat for Economic Affairs, Switzerland's primary sanctions-enforcement authority), that decision carries legal weight in both directions – maintaining a prohibited relationship creates liability, but terminating one without defensible grounds triggers its own regulatory and commercial risks.
Correspondent-banking de-risking (a financial institution exiting or restricting a relationship to avoid sanctions exposure) under SECO is governed by Swiss sanctions ordinances enacted under the Embargo Act, administered by SECO, and enforced in coordination with FINMA. The procedure turns on whether the respondent bank or its counterparties are caught by a Swiss prohibition, and the analysis must run in parallel against OFAC and EU Council regulations given the extraterritorial reach of both.
This guide walks the procedure step by step – from the initial screening hit through legal analysis, documentation, and the exit or retention decision – and identifies the pitfalls that expose Swiss correspondent banks and their foreign respondents to enforcement risk.
Step 1: Understand the SECO regime and its legal authority
SECO administers Swiss sanctions under the Embargo Act, issuing ordinances that impose asset freezes, prohibitions, and reporting obligations against designated persons, entities, and – in certain programmes – entire sectors or jurisdictions. SECO operates independently of the EU and OFAC, but in practice Switzerland has largely aligned its designations with EU Council regulations through separate ordinances, meaning that EU-listed persons are typically – though not always – covered by a parallel Swiss ordinance.
Why does this matter for a correspondent bank? Because the scope of a Swiss prohibition is not identical to the EU position. There are timing gaps when a new EU designation has not yet been mirrored by a SECO ordinance. There are also Swiss-specific carve-outs and humanitarian exceptions that differ from EU general licences. A compliance team that runs only EU-list checks and assumes Swiss coverage will miss those gaps.
FINMA – the Swiss Financial Market Supervisory Authority – supervises banks' implementation of SECO sanctions. FINMA's supervisory guidance on money-laundering and sanctions risk is the operational complement to SECO's legal rules. Banks must satisfy both. In our experience, the most defensible de-risking decisions are those that document the legal analysis under the SECO ordinances and address FINMA's supervisory expectations for risk-based correspondent-banking due diligence.
The position above covers the standard case. Your facts – the counterparty's jurisdiction, the relevant SECO ordinance in play, the nature of the underlying transactions – change the analysis materially.
For a confidential review of a correspondent-banking relationship under SECO, contact Calder & Vance at info@caldervance.com.
Step 2: Conduct the primary sanctions screen – what to check and in what order
The first operational step is a systematic screen of the respondent bank and, where the facts warrant it, the respondent's material customers and beneficial owners. That screen must cover at minimum: the SECO consolidated sanctions list, the UN Security Council Consolidated List, and – because of extraterritorial exposure – the OFAC SDN List and the EU Consolidated Financial Sanctions List.
Order matters. Start with the SECO list: it defines the Swiss legal prohibition. A positive SECO match means a Swiss bank faces a direct statutory prohibition, and the analysis is largely determined. A negative SECO match does not end the inquiry. A respondent that is not on the SECO list may still carry significant secondary-sanctions risk (the risk that transacting with it triggers OFAC or EU consequences even where no Swiss prohibition formally applies), and that risk is commercially and reputationally material even when it is not legally equivalent to a direct prohibition.
For UN-listed persons, Swiss law independently requires compliance with Security Council resolutions under Switzerland's international obligations, irrespective of whether a SECO ordinance has mirrored the listing.
After the list screens, the analysis turns to ownership and control. Under the Swiss ordinances, an entity may be caught not because it is itself listed but because a listed person owns or controls it. Swiss practice broadly follows the concept that a listed person's ownership interest sufficient to control an entity brings that entity within the prohibition – but Swiss ordinances state this test in terms that differ in detail from OFAC's mechanical 50 percent or more aggregate ownership rule and from the EU's combined ownership-and-control approach. Mapping that difference is critical when a respondent has a shareholder that is listed under one regime but not another.
Step 3: Legal analysis – does Swiss law prohibit the relationship?
Once the screen results are in hand, the legal question is whether maintaining the correspondent relationship, or processing a specific transaction, would constitute a prohibited act under the applicable Swiss ordinance. This requires reading the specific ordinance in scope: its asset-freeze provisions, its prohibition on making funds available, and any sector-specific restrictions.
Three analytical branches arise most frequently.
Branch A: The respondent or a material counterparty is directly listed on the SECO list. Here, Swiss law requires that assets be frozen and that no funds be made available. The correspondent bank has no lawful choice but to freeze the relevant assets, report to SECO, and cease prohibited transactions. Continued operation of the account would be a direct breach.
Branch B: The respondent is not listed, but a beneficial owner or controlling shareholder is listed. Here the analysis turns on whether the beneficial owner's interest is sufficient to bring the entity itself within the prohibition under the applicable ordinance. This is a legal judgment, not a screening output. It requires a documented ownership-chain analysis, a reading of the ordinance's control provisions, and – in cases of genuine uncertainty – a position paper that would withstand regulatory scrutiny.
Branch C: There is no Swiss legal prohibition, but the respondent's customer base or correspondent flows carry OFAC or EU exposure. Here the decision is not legally compelled under Swiss law but is driven by risk management. The bank must weigh: the secondary-sanctions exposure to OFAC enforcement (which can reach non-US institutions transacting in US dollars or with US nexus); the risk of violating an EU Council regulation if any EU-nexus transactions flow through the correspondent account; and FINMA's expectation that a Swiss bank manages sanctions risk proportionately across all material regimes, not only the Swiss list.
In a recent matter, a Swiss correspondent bank identified that a respondent's parent company was listed under a relevant EU Council regulation but not yet under the corresponding SECO ordinance – the Swiss ordinance had not been updated to mirror the new EU listing. We mapped the ownership chain, confirmed the SECO legal position, and advised on the secondary-sanctions exposure to EU enforcement for transactions with an EU nexus. The correspondent bank implemented targeted transaction restrictions while the SECO position was monitored for amendment. The relationship was managed without a unilateral exit that would have triggered counterparty claims.
Step 4: Decide – maintain, restrict, or exit, and document the decision
Once the legal analysis is complete, the decision point is whether to maintain the relationship as normal, introduce specific transaction restrictions, or terminate entirely. This decision must be made on a defensible, documented basis. Blanket de-risking – exiting whole categories of respondent banks without individual legal analysis – has attracted regulatory criticism from FINMA and from international bodies concerned about financial-system access, and it does not necessarily reduce legal risk if it results in the bank processing prohibited transactions elsewhere that the blunt exit was designed to avoid.
What does a defensible decision look like? At minimum, the file should contain: the screen results and their date; the ownership-chain analysis; the legal assessment under the applicable SECO ordinance; the secondary-sanctions risk assessment; a clear statement of the decision and the rationale; and the sign-off authority. Record-keeping obligations under Swiss anti-money-laundering rules are stringent. In our cross-border practice, we recommend that the decision file be prepared to the standard it would need to meet in a FINMA supervisory review or a SECO inquiry.
Where the decision is to exit, the exit itself must be managed. Closing an account without prior legal review of the exit mechanics can itself create risk: if blocked assets are in the account, they cannot simply be returned to the respondent. The procedure for dealing with frozen assets is governed by the applicable SECO ordinance, not by the bank's standard account-closure process.
If a transaction has already been flagged, or a filing has been refused, an early legal review can preserve options that narrow with time. Contact Calder & Vance at info@caldervance.com.
Step 5: Reporting obligations and the Swiss-specific requirements
A Swiss bank that identifies blocked assets or prohibited transactions is subject to reporting obligations to SECO. The obligation is triggered by the identification of a match, not by certainty of a breach. The reporting window is short, and the content of a report – what it must include, how it must be addressed – is defined by the applicable Swiss ordinance and SECO's administrative practice.
FINMA-supervised institutions have parallel obligations under Swiss anti-money-laundering rules. A sanctions-related finding may also constitute a money-laundering reporting obligation to MROS (the Money Reporting Office Switzerland), depending on the facts. Those two reporting streams are distinct and are addressed to different authorities. Confusing them, or treating one as a substitute for the other, is a common procedural error.
Voluntary disclosure to SECO in advance of an enforcement inquiry is possible and, in our experience, is a factor that affects the trajectory of any subsequent supervisory process. The window for voluntary disclosure is not formally defined by a fixed number of days in the way that OFAC's voluntary self-disclosure process operates – it is context-dependent – but early disclosure, made before a regulatory inquiry is opened, carries more weight than disclosure made after.
Cross-regime reporting adds a layer. If the bank is also subject to OFAC jurisdiction – for example, because it processes US-dollar transactions – it must consider whether a reporting or disclosure obligation arises under OFAC's own requirements in parallel with the Swiss obligation. Those two obligations can run simultaneously, and coordinating them requires legal advice in both regimes.
How does the Swiss SECO regime compare with OFAC and EU approaches to correspondent banking?
The three principal regimes – SECO, OFAC, and the EU Council regulations – share a common architecture: asset freezes, prohibitions on making funds available, and ownership tests for non-listed entities. Their implementation, however, diverges in ways that directly affect correspondent-banking decisions.
Under OFAC, the ownership test is mechanical: 50 percent or more aggregate ownership by blocked persons blocks the entity, regardless of how the ownership is structured or what the entity actually does. Control in itself is not separately tested; it is the ownership percentage that triggers the rule. OFAC operates with a substantial body of published guidance, FAQ responses, and licensing practice that, while not binding in the way a statute is, provides practical predictability.
Under the EU Council regulations, ownership and control are tested together. A listed person who owns less than 50 percent but exercises control over an entity's management or operations can bring that entity within the prohibition. The EU framework also permits derogations – transactions authorised by competent national authorities – that operate differently from OFAC general licences and specific licences.
SECO ordinances are drafted more concisely than their OFAC or EU counterparts. The ownership-and-control provisions are typically shorter, which creates interpretive gaps that are resolved through SECO's administrative practice and, in borderline cases, through direct engagement with SECO. That interpretive latitude is both an opportunity – Swiss counsel can engage SECO constructively on unclear facts – and a risk, because published guidance is less extensive than under OFAC or the EU.
For a business with exposure to all three regimes – for example, a Swiss bank processing US-dollar transactions with EU-connected counterparties – the stricter prohibition governs each element of the analysis. Where OFAC's ownership rule is met, the transaction is prohibited regardless of whether the SECO test is satisfied. That principle does not simplify the analysis; it means that a multi-regime screen is mandatory, and a clearance under one regime is not clearance overall.
For a comparison of the OFAC de-risking service and what it covers for US-regime exposure, see our page on correspondent-banking de-risking under OFAC.
For the Singapore correspondent-banking regime, see our Singapore correspondent-banking de-risking guide. For the UAE position, see our UAE correspondent-banking de-risking guide.
Common pitfalls and risk flags in SECO correspondent-banking de-risking
Most enforcement exposure in this area comes not from a deliberate decision to maintain a prohibited relationship but from procedural failures: incomplete screens, undocumented legal analysis, and misaligned reporting. The following pitfalls arise consistently across our cross-border practice.
Assuming EU coverage equals SECO coverage. Because Switzerland aligns many of its sanctions with EU designations, compliance teams sometimes treat a clean EU-list check as sufficient for Swiss purposes. It is not. SECO ordinances are enacted separately; their timing, scope, and carve-outs differ. A designated person may appear on the EU list days, weeks, or occasionally months before a corresponding SECO ordinance is issued.
Stopping the screen at the first legal entity. Screening only the respondent bank without tracing its beneficial owners and material shareholders is a structural gap. The ownership-and-control question – whether a listed person's interest in the respondent brings it within a prohibition – cannot be answered without the underlying ownership data.
Treating de-risking as a compliance solution in itself. Exiting a relationship does not erase the question of what happened before the exit. If prohibited transactions were processed prior to termination, the exit does not retrospectively cure the breach. The legal analysis of prior transactions, and any reporting obligations arising from them, remains live after the account is closed.
Conflating SECO reporting with MROS reporting. These are distinct obligations to distinct authorities. A report filed with SECO does not discharge a potential MROS reporting obligation, and vice versa. In practice, a single set of facts may give rise to both, and they must be addressed separately with appropriate legal advice.
Overlooking the exit mechanics for blocked assets. When a decision is made to close a correspondent account and the account holds or may hold blocked assets, the standard account-closure procedure is not applicable. The ordinance prescribes the treatment of frozen assets. Using a standard closure mechanism to return funds to a respondent whose assets are frozen is itself a prohibited act.
A common myth in this area is that de-risking decisions are purely commercial and therefore outside the scope of regulatory review. That is not correct. FINMA expects Swiss banks to conduct proportionate, documented, and legally grounded de-risking decisions. A purely commercial rationale that ignores the legal position under the applicable SECO ordinance does not discharge the bank's compliance obligations and, if it results in the continued processing of prohibited transactions elsewhere, may increase rather than reduce regulatory exposure.
Related practices
Related practices
- Correspondent-banking de-risking under OFAC – US-regime correspondent-banking analysis, SDN screening, and secondary-sanctions risk assessment.
- Correspondent-banking de-risking under Singapore MAS – Singapore-regime obligations, MAS list screening, and cross-border comparison with SECO and OFAC.