SWITZERLAND: Switzerland’s FINMA warns of money laundering risks with crypto

In its 2024 Risk Monitor report, the regulator noted that cryptocurrencies, including stablecoins, are increasingly used for cyberattacks, payments for illegal dark web activities, and evading sanctions linked to geopolitical conflicts.

Particularly, stablecoins have seen a “big rise” in illicit transactions related to sanction evasions, further complicating anti-money laundering efforts.

To combat money laundering risks, FINMA outlined its broader efforts, including onsite reviews, an overhaul of its audit program, and a focus on risk tolerance and management for entities with politically exposed customers or links to high-risk areas.

In relation to digital assets, FINMA stated that it “takes institution-specific measures to mitigate the money laundering risk,” applying targeted oversight to address vulnerabilities effectively.

Earlier this year, the regulator published guidelines to address risks associated with stablecoins, which require issuers to verify the identities of token holders and beneficial owners.

Further, the regulator cautioned that financial intermediaries operating in the crypto sector without proper risk management measures could face legal consequences and damage to their reputations.

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Regulatory concerns about cryptocurrencies and stablecoins are not confined to Switzerland. Globally, cryptocurrencies and related businesses have been flagged for their potential links to money laundering and other illicit activities, prompting increased scrutiny and calls for enhanced oversight across jurisdictions.

In May, the U.K. Financial Conduct Authority identified crypto-asset firms as among the sectors most vulnerable to money laundering in 2022-23. As such, the regulator has implemented a rigorous registration process for crypto businesses to counter these risks.

Platforms like Binance, KuCoin, and others have also faced scrutiny in connection with money laundering allegations over the years.

Tether, the issuer of the world’s largest stablecoin USDT, has long faced accusations of facilitating money laundering and other illicit activities.

Recently, the company came under renewed scrutiny after reports surfaced that the U.S. Department of Justice launched an investigation into potential violations of sanctions and anti-money laundering regulations. However, it has denied any wrongdoing, stating that it has seen “no indication” of an investigation.