FINMA publishes AML guidance on blockchain

“FINMA recognises the innovative potential of new technologies for the financial industry,” the government body said. “However, blockchain-based business models cannot be allowed to circumvent the existing regulatory framework. This applies particularly to the rules for combating money laundering and terrorist financing, where the inherent anonymity of blockchain technology presents increased risks.”

The new guidance comes two months since the Financial Action Task Force (FATF)—the international body tasked with developing policies to combat money laundering—issued its own guidance on financial services in the context of blockchain technology. “As for traditional bank transfers, information about the client and the beneficiary must be transmitted with transfers of tokens, except for transfers from and to unregulated wallet providers,” FINMA said. “Only then, for example, can the provider receiving this information check the name of the sender against sanction lists or check that the information provided about the beneficiary is correct.”

FINMA also announced it has issued banking licenses to two new blockchain service providers.

AML and blockchain

FINMA states it has consistently applied the Anti-Money Laundering Act to blockchain service providers since their emergence.

“Institutions supervised by FINMA are only permitted to send cryptocurrencies or other tokens to external wallets belonging to their own customers whose identity has already been verified and are only allowed to receive cryptocurrencies or tokens from such customers,” FINMA said. “FINMA-supervised institutions are, thus, not permitted to receive tokens from customers of other institutions or to send tokens to such customers.”

FINMA explains this practice applies as long as information about the sender and recipient cannot be transmitted reliably in the respective payment system, unlike the FATF standard, which includes an exception in Switzerland for unregulated wallets.

New blockchain service providers

FINMA’s guidance coincided with another announcement that it has granted its first two banking and securities dealers’ licenses to two pure-play blockchain service providers. The companies are SEBA Crypto, registered in Zug; and Sygnum, registered in Zurich. Both blockchain service providers will offer services for institutional and professional customers.

“With its banking and securities dealer license having full legal force, Sygnum can now deliver secure and convenient banking services for digital assets to its customers, including institutional and private qualified investors, corporates, banks and other financial institutions,” Sygnum said in a statement.

“This means, for the first time, digital assets are fully bankable,” Sygnum continued. “This is achieved by seamlessly integrating Swiss Francs, U.S. and Singapore Dollars and Euros, plus major digital assets including Bitcoin and Ethereum as well as digital CHF tokens, into one account. Asset tokens based on existing assets are planned to be offered soon.”