Compliance
Enhanced due diligence in practice
Updated: · Leutrim Miftaraj, FLIORE · Editorial standards · Deutsche Fassung
Short answer
Enhanced due diligence applies where risk is higher, in particular for politically exposed persons, links to high-risk countries and unusually complex structures or transactions. It requires additional checks on the source of wealth and funds, approval by a member of senior management and closer monitoring. Every measure and its outcome must be documented in a traceable way.
When enhanced duties apply
All jurisdictions in German-speaking Europe distinguish between cases where the law presumes higher risk and cases where the family office identifies it under its own criteria. Statutory cases include foreign politically exposed persons, relationships linked to countries classified as high-risk by the FATF or the EU, and transactions that are unusually large, unusually complex or without apparent purpose.
In Switzerland, Art. 6 para. 2 AMLA requires special clarifications where a transaction or relationship appears unusual or there are indications of a link to crime. In Germany, section 15 GwG sets out enhanced due diligence in detail.
The measures at a glance
- Ask about the source of total wealth and the source of the specific funds, and corroborate the answers with evidence.
- Obtain approval from a member of senior management to enter into or continue the relationship.
- Shorter review interval and closer monitoring of transactions.
- Gather additional information on the purpose of the structure and the persons involved.
- Record results, open points and the decision in writing.
Corroborate rather than collect
The most common mistake is a pile of documents without assessment. A sale agreement for a company, a certificate of inheritance or salary statements prove nothing until someone records how they explain today's wealth. A short derivation – "net sale proceeds in 2019 of about 40 million, investment income since then according to custody statements" – says more than twenty uncommented attachments.
Where evidence is missing, for example for very old family wealth, a plausible account supported by independent sources is sufficient – such as commercial register extracts, press reports or confirmations from tax advisers.
Senior management approval
Approval is more than a signature. The approving person must know the risk profile and consciously decide that the family office is willing to carry the risk. A short decision sheet with risk factors, results of the checks, conditions and the date of the next review is useful.
When the relationship cannot go ahead
If due diligence cannot be fulfilled, the relationship must not be established or continued; in Germany this follows expressly from section 10 para. 9 GwG. If there is a suspicion, the reporting duty takes precedence: in Switzerland to MROS, in Germany to the FIU, in Austria to the financial intelligence unit at the Federal Criminal Police Office.
In FLIORE
FLIORE flags PEPs and high-risk countries on the mandate, sets a shorter review interval for high risk and stores evidence on the source of wealth in the encrypted document vault. Approvals run through the four-eyes workflow with an audit trail.
At a glance
| Typical triggers | PEP, high-risk country, complex or unusual structures and transactions |
|---|---|
| Core measures | Source of wealth and funds, senior management approval, closer monitoring |
| Legal basis | Art. 6 AMLA (CH), section 15 GwG (DE), FM-GwG (AT) |
Frequently asked questions
Is every PEP automatically high risk?
Foreign PEPs are higher risk in Switzerland, Germany and Austria. For domestic PEPs and officials of international organisations, Swiss law presumes higher risk only where additional risk factors exist.
How often is a high-risk relationship reviewed?
The law usually sets no fixed period. Many family offices review high risks annually and additionally on any notable event. What matters is that the interval is set in internal directives and observed.
Is a self-declaration on the source of wealth enough?
For higher risk, usually not. The information must be corroborated, ideally with independent evidence. The self-declaration is the starting point, not the end of the check.
May the family office keep a high-risk relationship?
Yes. High risk is not a reason for exclusion but requires enhanced measures. The relationship is excluded only if the duties cannot be fulfilled or a suspicion cannot be dispelled.
Sources
- Swiss Anti-Money Laundering Act (AMLA/GwG, SR 955.0) – Fedlex
- German Money Laundering Act (GwG), section 15 – Enhanced due diligence
- German Money Laundering Act (GwG), section 10 – General due diligence
- FATF Recommendations – Financial Action Task Force
This page provides orientation and does not replace legal or tax advice. The cited legal sources in their applicable version are authoritative.
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