On December 10, 2019, the Swiss Financial Market Supervisory Authority (FINMA) published its inaugural report on market risk in the Swiss economy. The report provides an overview of what FINMA believes are the most important risks currently facing Swiss supervised institutions and describes the resulting focus of its supervisory activity.
In a section of the report discussing risks associated with money laundering, FINMA observed:
…The financial industry also faces new risks in the area of blockchain technology and the cryptoassets that are attracting growing interest from clients. Although these new technologies promise efficiency improvements in the financial industry, they also accentuate the threats posed by money laundering and the financing of terrorism due to the greater potential anonymity they involve, as well as the speed and cross-border nature of the transactions. 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.
In recent years, Switzerland and certain of its cantons have held themselves out as friendly venues for blockchain and cryptocurrency entrepreneurs. Given Switzerland’s historical reputation for secrecy, neutrality and light-touch regulation, many crypto entrepreneurs have in turn found it to be a favorable place to do business. The report’s identification of potential AML issues associated with digital assets may, however, foreshadow tighter FINMA oversight of financial institutions and their cryptobusiness clients.
Indeed, numerous media outlets have reported that, in connection with the release of the report, FINMA Chief Executive Officer Mark Branson told journalists, “We want to give them a chance and we have done a lot to remove unnecessary barriers to enable projects” based on digital currencies. He continued, “But we are also not starry-eyed as these new business models come with new risks, or old risks in new shapes.”