FINMA wants to bring stricter AML rules for crypto transactions

FINMA Wants to Bring Stricter AML Rules for Crypto Transactions

The Swiss Financial Market Supervisory Authority (FINMA) suggests a plan to bring stricter anti-money laundering rules for crypto transactions. As per the proposal, crypto transactions of over 1,000 Swiss Francs will require client identification as opposed to the current limit of 5,000 francs. FINMA said the new limit is due to heightened money laundering risks in the crypto space.

The proposal will also bring the new threshold in line with the international standards approved in mid-2019. FINMA said indicating the Financial Action Task Force’s directive from last June.

FATF, an international money-laundering watchdog, approved a maximum transaction limit of $1,000 for unidentified crypto transactions. It means crypto firms, including exchanges, are required to collect client information of those initiative transactions over $1,000. In addition, details about recipients of those funds.

FINMA will hold a public consultation on the new limit proposal until April 9, 2020, per the announcement.

Last month, the European Union also implemented its Fifth Anti Money Laundering Directive (AMLD5), which requires crypto firms and exchanges to follow enhanced know-your-customer (KYC) programs and reporting obligations.

Combating Money Laundering Requires Identification

FINMA recognizes the innovative potential of new technologies for the financial industry. It applies the relevant provisions of financial market law in a technology-neutral way. However, blockchain-based business models can’t 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.

In June 2019, the international body tasked with developing policies to combat money laundering, the FATF, issued guidance on financial services in the context of blockchain technology. As for traditional bank transfers, information, about the client and beneficiary must be transmitted with transfers of tokens. 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.

Anti-Money Laundering Regulations Apply to the Blockchain & Crypto Space

FINMA has consistently applied the AML Act to blockchain service providers since its emergence. It also provides information about the technology-neutral application of the regulation to payment transactions on the blockchain. FINMA supervised institutions can send cryptocurrencies or other tokens to external wallets belonging to their own customers with a verified identity. And they can also receive cryptocurrencies or tokens from such customers.

FINMA-supervised institutions can’t receive tokens from customers of other institutions or to send tokens to such customers. This practice applies as long as information about the sender and recipient can’t be transmitted reliably in the respective payment system. Unlike the FATF standard, this established practice applies in Switzerland without the exception of unregulated wallets and is, therefore, one of the most stringent in the world.