Globally, the cryptocurrency industry is subject to illicit activities, notably money laundering — read about the underlying reasons in our previous article Combating money laundering related to cryptocurrencies. In 2018, the National Risk Assessment (NRA) regarding Risk of money laundering and terrorist financing posed by crypto assets and crowdfunding concluded that this global risk is also considerable for Switzerland. Consequently, questions arose around the regulatory mechanism required to combat money laundering related to cryptocurrencies.
Published later in 2018, the Federal Council Report Legal framework for distributed ledger technology and blockchain in Switzerland — An overview with a focus on the financial sector discussed, among many other topics, whether and how Switzerland’s existing financial market legislation governing the combating of money laundering and in particular the Federal Act on Combating Money Laundering and Terrorist Financing (AMLA), the Anti-Money Laundering Ordinance (AMLO) and the Ordinance on Combating Money Laundering and Terrorist Financing in the Financial Sector issued by the Swiss Financial Market Supervisory Authority (FINMA) (AMLO-FINMA) are applicable to activities in the crypto area.
The Report concluded that AMLA is sufficiently neutral with respect to technology and can thus be applied to a large extend to activities related to cryptocurrencies. It further established that the activities of most actors in the cryptocurrency industry can be classified as financial intermediary activities, which makes them also subject to AMLA. This, for example, means that they are required to verify the identity of the client/customer (article 3) and establish the identity of the beneficial owner (article 4). Note, FINMA allows to verify identities digitally, which subsequently permits onboarding of new customers/clients through digital tools (for details, see Circular 2016/07 Video and online identification and the latest updates provided by FINMA). Other obligations posed by AMLA include the duty to keep records (article 7) and to file a report with the Money Laundering Reporting Office Switzerland (MROS) in case of reasonable grounds to suspect money laundering (article 9).
However, the Report also states that while the scope of AMLA is already relatively comprehensive, it does not cover providers of non-custodian wallets, certain decentralised trading platforms, and the issue of pure asset and utility tokens. To address issues raised by the Report (not only regarding combating money laundering), the Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology (DLT bill) was prepared — with the provisions of the DLT bill regarding combating money laundering and the subsequent changes to AMLA entering into force on August 1st, 2021. For instance, the scope of AMLA was extended to also cover DLT trading facilities and virtual currency payment services so that both became subject to AMLA.
In addition, in August 2019, FINMA published the Guidance on Payments on the blockchain to provide further information about the application of regulatory requirements for payments on the blockchain for financial service providers under FINMA supervision. It especially clarified the applicability of Article 10 AMLO-FINMA, which requires that information about the client and the beneficial owner need to be transmitted with the payment order and reconfirmed that this article also applies to services based on blockchain technology (so called Travel Rule).
Lastly, Switzerland is a member of the Financial Action Task Force (FATF) and is thus committed to implement the FATF Recommendations on combating money laundering and the financing of terrorism & proliferation. Switzerland’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. In March 2022, FINMA partially revised the AMLO-FINMA to take into account the amendment and conducted a consultation. On November 2nd 2022, FINMA publishing the final version of the ordinance.
last updated on January 12th, 2023
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