The new Swiss Transparency Act requires companies to report their beneficial owners to the transparency register. Many wonder whether compliance with these duties is actually monitored, or whether the act is merely a paper tiger. This article shows that the TJPG provides for a multi-stage control system involving the register-keeping authority, difference reports, flags and a risk-based supervisory authority. It explains the consequences of incorrect filings and sets out why companies should document their ownership structure properly and well in advance.
Introduction
With the new Federal Act on the Transparency of Legal Entities and the Identification of Beneficial Owners (TJPG), many Swiss companies will face a central obligation, namely the duty to report their beneficial owners to the transparency register. In conversations with board members, executives and founders, the same question keeps coming up. Will compliance with these obligations actually be enforced, or is the Transparency Act ultimately just a paper tiger?
The short answer is that the TJPG is no toothless paper tiger. The act sets out a multi-stage, tightly interlinked control system specifically designed to detect and enforce missing, incomplete, late or incorrect filings. In this article, you will learn how this control system works in practice, which authorities are involved and what consequences companies face if they do not take their obligations seriously.
Table of Contents
- How the Transparency Act is actually enforced
- The interlinked control mechanisms at a glance
- The two key authorities in the control system
- Difference reports and flags as triggers for controls
- Risk-based controls and how companies come under scrutiny
- What happens in the event of inconsistencies?
- Conclusion
How the Transparency Act is actually enforced
The Transparency Act requires legal entities subject to reporting obligations to register their beneficial owners correctly, completely and on a current basis in the transparency register. The decisive point is that the act does not rely on pure self-declaration on the basis of personal responsibility. Instead, it sets up an active control system that links company filings with feedback from authorities and financial intermediaries as well as a risk-based review by a specialised supervisory authority.
The aim of this approach is to ensure that the information held in the register is not only formally available, but also substantively correct. Put differently, the report to the transparency register should not remain a mere bureaucratic exercise, but rather provide a reliable picture of the actual ownership and control structures of a company.
The interlinked control mechanisms at a glance
The enforcement of the Transparency Act takes place in several coordinated steps rather than in a single one-off check. In simplified terms, the following stages can be distinguished:
- Initial review of the filing by the register-keeping authority, including a request to remedy gaps where necessary (Art. 33 TJPG).
- Difference reports submitted by authorities and financial intermediaries when their own data deviates from the register entries, leading to a flag in the register (Art. 34 TJPG).
- Risk-based or random review of register entries by the supervisory authority (Art. 35 TJPG).
- Preliminary review and, if necessary, formal control proceedings with mandatory information disclosure (Art. 36 and 37 TJPG).
- Imposition of measures where deficiencies have been identified (Art. 38 TJPG).
Already at the initial review stage, it becomes visible if a company fails to comply with its reporting obligation or provides incomplete information. The subsequent stages then focus on the substantive accuracy of the data and on the enforcement of the reporting obligation in the narrower sense. This interplay shows that the control of reporting obligations to the transparency register is structured systematically and clearly geared towards enforcement.
The two key authorities in the control system
The register-keeping authority as the first review and coordination point
The register-keeping authority is the first point of contact for all filings and is located within the Federal Office of Justice. It first reviews whether the legal entities subject to reporting obligations have complied with their duties, requests missing information or supporting documents where needed, sets deadlines and explicitly points out the consequences of non-compliance (Art. 33 TJPG). It also receives entries, checks them for plausibility and ensures that inconsistencies between different data sources are made visible. In particular, it processes difference reports, places flags in the register and assigns the legal entities to a risk category (Art. 33 and 34 TJPG).
The register-keeping authority thus lays the foundation for all further controls. Its role is less about in-depth substantive review and more about systematically capturing and surfacing gaps, risks and inconsistencies. It is the hub where the various streams of information converge.
The supervisory authority as the substantive review and enforcement body
The actual enforcement of the Transparency Act is carried out by the supervisory authority (Art. 39 TJPG). It does not review register entries comprehensively, but in a targeted manner, either on a risk basis or by way of sampling (Art. 35 TJPG). In doing so, it can access additional data sources and require companies and other parties to provide information.
The supervisory authority does not only conduct reviews but can also take measures and refer breaches for further action. It is therefore the central element for the substantive control and effective enforcement of the reporting obligations. Companies that do not take their duties seriously will sooner or later encounter the supervisory authority in practice.
Difference reports and flags as triggers for controls
A central element of the control system are the so-called difference reports. They arise when authorities or financial intermediaries find that their own information deviates from the data in the transparency register. In such cases, a flag is placed against the relevant company in the register (Art. 34 TJPG).
A flag of this kind is more than a technical note, as it visibly signals that there are doubts about the accuracy or completeness of the filing. In practice, the following triggers for a flag are typical:
- A financial intermediary, in the course of its due diligence, finds that the beneficial owner is identified differently from the entry in the register.
- Another authority holds information that does not match the register entries.
- The company fails to comply with a request from the register-keeping authority, for example by not submitting a complete report on the beneficial owner despite repeated requests.
The mere existence of a flag automatically results in a medium risk classification. This significantly increases the likelihood of further reviews and entails additional clarification efforts for the affected company. Because the topic of flags is complex and has far-reaching practical consequences, we will address it in greater depth in a separate article.
Risk-based controls and how companies come under scrutiny
The supervisory authority does not act randomly, but according to a clear risk model. Companies are assigned to different risk categories ranging from low to very high. The following factors are particularly decisive:
- Complexity and transparency of the participation and control structure.
- International ties, in particular shareholdings spanning several jurisdictions.
- Involvement of fiduciary relationships or trusts.
- Existing flags or other irregularities already noted in the register.
The last point is especially relevant in practice. Once a flag has been set, it acts like a permanent signal in the system and increases the likelihood of further controls over an extended period. The result is a dynamic control mechanism that targets precisely those entities where the probability of inconsistencies is highest. For companies with complex shareholding structures or cross-border elements, this means heightened attention from the authorities as soon as even minor inconsistencies appear.
What happens in the event of inconsistencies?
Where doubts arise during a control, a preliminary review is carried out first (Art. 36 TJPG). Depending on the outcome, the flag may be removed, remain in place or escalate into formal control proceedings. In such proceedings, the company and other parties involved may be required to provide additional information and supporting documents (Art. 37 TJPG).
If it turns out that the data is incorrect or incomplete, the supervisory authority can order corresponding measures (Art. 38 TJPG). For companies, this means in concrete terms that incorrect, contradictory or unclear filings not only lead to administrative effort, but can also drag on through several costly procedural steps. Added to this is the risk of fines as well as potential reputational damage, particularly if business partners, banks or investors become aware of an existing flag.
Conclusion
The Transparency Act is by no means a paper tiger. It combines the formal initial review by the register-keeping authority, difference reports from authorities and financial intermediaries, visible flags in the register and a risk-based substantive review by a specialised supervisory authority into an effective enforcement system. Companies that fail to take their reporting obligations seriously risk not only additional effort and fines, but also reputational damage and lengthy proceedings.
In addition, the transition periods for the initial filing are short. Companies should therefore start preparing now, well before the Transparency Act enters into force. This includes, in particular, properly documenting their own ownership structure, reliably identifying their beneficial owners and keeping the underlying supporting documents in good order. Those who take care of these tasks early on will not only avoid flags and follow-up reviews, but will also be in a noticeably more comfortable position vis-à-vis banks, investors and business partners.
Prepare your company in good time
Use the time remaining until the TJPG enters into force to review your ownership structure, properly capture your beneficial owners and prepare your internal processes for filings to the transparency register. A structured, digital record of your shareholdings and ownership relationships makes this step considerably easier, as changes can be documented in a traceable manner at any time. With Konsento's digital share register, free of charge for up to 150 shareholders, you not only document your shareholdings and ownership structure in a structured and audit-proof manner, but already today capture the notifications of beneficial ownership made by shareholders to the company. This gives you a reliable basis to identify the beneficial owners without gaps and to prepare the filing to the transparency register in good time and correctly.
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