The Swiss Financial Market Supervisory Authority (FINMA) yesterday published new regulatory guidance for blockchain-based payment transactions and financial service providers. The guidance was released following a US Congressional trip to Switzerland orchestrated to better understand regulations on virtual assets. In the guidance, FINMA reaffirms strict approach to anti-money laundering and blockchain technology.
While supporting innovative new technologies for the financial markets, FINMA stated in the guidance that blockchain-related businesses are not allowed to circumvent the existing the Swiss Anti-Money Laundering Ordinance. Following the FATF Recommendations on Virtual Assets and Virtual Asset Service Providers, FINMA clarified how financial service providers in blockchain industry will be regulated in Switzerland.
Under FINMA supervision, Virtual Asset Service Providers such as exchanges, wallet providers, and trading platforms must follow the existing rules on combating money laundering and terrorist financing. Thus, such providers are required to verify the identity of their customers, to establish the identity of the beneficial owner(s), to take a risk-based approach to monitoring business relationships and to file a report to the Money Laundering Reporting Office Switzerland (MROS) if there are reasonable grounds to suspect money laundering.
[Key points from FINMA guidance on financial service providers on blockchain]
1. The financial intermediary shall check the name of the originator against sanction lists and make sure whether the information for the beneficiary is correct.
2. The financial intermediary shall return the payment if there’s any discrepancies in received information.
3. Transmission of information does not need to be on the blockchain.
4. Unlike FATF standards, Article 10 AMLO-FINMA does not provide for any exception for payments involving unregulated wallet providers.
5. In case where financial institution supervised by FINMA is not able to send and receive the required information, the transaction is only permitted from and to external wallets belonging to one of the institution’s own customers. The customer’s ownership of the external wallet shall be proven by suitable technical means.
6. Transaction from or to an external wallet belonging to a third party is only permitted is the supervised institution verified the identity of the third party, established the identity of the beneficial owner and proved the third party’s ownership of the external wallet using suitable technical means.