Switzerland's Financial Market Supervisory Authority (FINMA) is extending money-laundering checks for certain crypto transactions, which aligns with FATF's limit for the Travel Rule provision to kick in. The new rules are scheduled to go into effect in January 2023.
FINMA's anti-money laundering (AML) ordinance will require customers to prove their identity if they make transactions equivalent to or more than a total of 1,000 Swiss francs ($1,000) for a month when they swap crypto for cash or any other anonymous form of money.
"Virtual currencies are often used as a payment instrument for illicit trade, notably in drug trafficking, on the darknet, or for the payment of ransoms after cyberattacks," a report issued by the Swiss regulator said. "The risk of money laundering in the domain of virtual currency is reinforced by potential anonymity and by the speed and cross-border nature of transactions."
Relevant Article: UK Passes Bill to Recognize Crypto as Regulated Financial Instruments
It was back in May when FINMA first published a consultation that proposed tightening the limit to stop "smurfing," which involves breaking up a large payment into smaller chunks to avoid money-laundering checks.
Despite significant pushback from users, FINMA said "in view of the risks and recent instances of abuse," it "stands by" its plans and would not be increasing the threshold to as much as 25,000 francs, which was what some of the country's industry proponents and crypto enthusiasts were demanding.
The new rules would only apply to anonymous transactions conducted through unhosted wallets.
FINMA also noted that the mandatory identity verification of beneficiaries and the periodic checks establishing that client data is up to date do not need to be detailed.
Virtual asset service providers (VASPs) in Switzerland are already required to share identifiable customer data when transferring crypto if its fiat value exceeds a certain threshold and prove ownership of non-custodial wallets under the "travel rule." The country implemented the FATF Travel Rule on August 26th, 2019.
At first, FINMA decided to set the Travel Rule threshold at 5000 francs but later agreed to lower it to 1000 Swiss francs, citing increased money laundering risks.
Interestingly, the latest rules come when Switzerland is setting itself out as a crypto hub. And the plans seem to be working, as over 1,000 blockchain companies currently operate in Switzerland, encouraged by the welcoming political and legal infrastructure.
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