Money laundering: Focus of conduct supervision (2021)

In the year under review, FINMA analysed numerous offered and planned services in the crypto area. It provided the institutions with further details of its expectations in relation to the money laundering regulations, including in consultation with the self-regulatory organisations responsible for the money laundering supervision of numerous providers.

Positive trends were seen with respect to the preventive reports being made to the Money Laundering Reporting Office Switzerland (MROS). Transaction monitoring has increasingly served as a source of information. With the sharp increase in demand for sustainable investment products, FINMA also intensified activities aimed at preventing greenwashing.

Money laundering supervision in the crypto area

Cryptocurrencies entail higher risks as a result, in particular, of their anonymity and the technology-driven speed of the transactions as well as the fact that the transactions are not tied to a particular location. By using cryptocurrencies, large amounts can be transferred from one electronic account to another in a matter of seconds, without the senders or recipients of the transactions being identifiable. The Financial Action Task Force on Money Laundering (FATF) confirmed this finding in a report published in 2021.

The institutions supervised by FINMA are increasingly offering services in the crypto area, or planning to launch such offers. In the year under review, FINMA analysed a variety of business activities that banks were planning to introduce in this area and reviewed these with a particular focus on compliance with the money laundering regulations. This also included projects to issue stable coins.

FINMA also provided further details on its expectations for the auditing of institutions active in the crypto area. During the summer of 2021, it supplemented the five existing risk-based modules, which are used for reviewing compliance with the Anti-Money Laundering Act (AMLA), with a sixth module on virtual assets (VAs) and virtual asset service providers (VASPs).

A large number of providers in the crypto area are not supervised by FINMA and are instead affiliated with self-regulatory organisations (SROs) that are responsible for conducting money laundering supervision. The discussions between FINMA and the relevant SROs focused on how to implement the travel rule in conformity with FINMA Guidance 02/2019 “Payments on the blockchain” of 26 August 2019. In order to gain insight into the specific supervisory work being conducted in this area, FINMA performed an on-site supervisory review at one of the SROs during 2021.

During its discussions with the SROs, it also addressed the money laundering regulations that apply to the exchange of cryptocurrencies. Whereas clients were always identified in the case of long-term business relationships, identity checks for spot transactions with occasional clients were only being performed if the transaction value exceeded a certain threshold. On 1 January 2021, FINMA specified that contracting parties must be identified if they are executing cryptocurrency exchanges with a value above CHF 1,000 (previously CHF 5,000). The adjusted threshold value meets the requirements of the FATF recommendations and reflects the increased risks in this area. It has been adopted by the SROs. One application example would be the ATMs for cryptocurrencies. In order to effectively apply the threshold, operators must implement technical measures to ensure that their ATMs do not enable cryptocurrency transfers to third-party wallets.

(From the Annual Report 2021)