The cryptocurrency industry has emerged largely in an unregulated space, making it subject to illicit activities, notably money laundering. Money laundering activities related to cryptocurrencies range from laundering digital proceeds to converting large sums of cash into virtual assets.
There are various reasons for the use of cryptocurrencies in money laundering activities. The decentralised nature of cryptocurrencies allows to potentially circumvent central authorities and to overcome geographical constraints through cross-border payments. Additionally, the (pseudo-)anonymity of the crypto asset owners makes it difficult to establish their identities as well as to prove the criminal origin of involved assets.
As a measure to combat illicit activities, the Financial Action Task Force (FATF) — an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction — published in 2012 the FATF Recommendations. These Recommendations are internationally recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standards and FATF member states are expected to transform them into national law. In 2019, these Recommendations were extend to also cover virtual assets and virtual asset service providers.
The FATF Recommendations foresee for instance that financial institutions are required to undertake customer due diligence by verifying the identity of the customer and beneficial owner of a transaction, to hold all necessary records on both domestic and international transactions for at least five years and to report any suspicions of illicit activities. For details, have a look at our article Overview of measures to detect and prevent money laundering and financing of terrorism involving digital assets.
Switzerland, as a member of the FATF, takes actions on this front, while it’s compliance with the FATF standards is regularly evaluated. To implement the recommendations of the last evaluation, the Parliament adopted an amendment to the Anti-Money Laundering Act in March 2021. Learn more about Switzerland’s regulatory mechanism to combat money laundering related to cryptocurrencies in this article.
Would you like to stay up-to-date?
Subscribe to our Medium page. Follow us on Twitter and connect on LinkedIn.