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Blockchain increasing money laundering threat: Swiss regulator



The Swiss Financial Market Supervisory Authority (FINMA) has warned the country that it is facing an increased threat of money laundering risks from among other sources, blockchain technology. The Swiss financial regulator stated that these risks are rising as blockchain and crypto assets continue to gain widespread use.

These concerns were brought to the fore in FINMA’s first-ever yearly risk monitor report stating:

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In addition to […] traditional money-laundering risks, the financial industry also faces new risks in the area of blockchain technology and the cryptoassets that are attracting growing interest from clients.

The report published on Dec. 10 acknowledged that while these new technologies can increase efficiency in the financial sector they may also raise the risk levels. Particularly, the regulator believes that blockchain technology increases money laundering and terrorism financing threats. The agency cited blockchain features such as anonymity, speedy transactions, and borderless nature as being attractive instruments for criminal use.

The FINMA report contends that Switzerland is natural target for money launderers given its status as a private wealth management hub. Therefore, in comparison, the country faces greater threat of money laundering, and from other avenues besides blockchain. However, the regulator feels that shrinking profit margins in the banking sector could tempt organisations to enlist clients from higher-risk emerging markets.

The Swiss regulator also indicated that if the prevalent use of cryptocurrencies in criminal activities continues, it could slow their adoption. The regulator believes that it could also negatively affect blockchain technology potential development and standing with the regulator.

Malpractice by the financial institutions active in FinTech could significantly damage the reputation of the Swiss financial centre and slow down the development of digitalisation.

These concerns seem to ring true with the Council of the European Union and the European Commission recently issuing a joint statement restricting stablecoins’ usage in the region. They stated that no global stablecoin project will be allowed to operate in the EU unless all perceived risks such as money laundering and tax evasion are addressed.

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Following the announcement, exchanges have moved to delist highly private cryptocurrencies. Case in point, BitBay, a cryptocurrency exchange, begun the process of delisting Monero (XMR), a privacy-centric cryptocurrency in late November. This was after OKEx cryptocurrency exchange delisted several privacy-centric cryptocurrencies from in September.

Image by mohamed Hassan from Pixabay



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