Switzerland regulator warns of rising crypto money laundering risks

Switzerland’s Financial Market Supervisory Authority (FINMA) has raised concerns about increasing money laundering risks in the crypto sector.

The warning, detailed in FINMA’s 2024 Risk Monitor report, highlights the growing misuse of digital assets like cryptocurrencies and stablecoins for illicit activities.

The report indicated that stablecoins are increasingly used in illegal transactions, such as sanctions evasion. This trend complicates enforcement efforts and heightens legal and reputational risks for financial institutions without robust risk management strategies.

The regulator emphasized the need for stronger measures to address vulnerabilities linked to the misuse of digital assets.

It added:

“Money laundering risks can be considerable for financial intermediaries with a crypto offering. Financial intermediaries active in this area without adequate management of money laundering risk can seriously damage the reputation of the Swiss financial centre.”

This warning follows a similar advisory issued earlier this year, where FINMA urged stablecoin issuers and banks to verify token holder identities to reduce exposure to money laundering.

According to the regulator:

“FINMA draws attention to the increased risks in the areas of money laundering, terrorist financing and the circumvention of sanctions. These also result in reputational risks for the Swiss financial centre as a whole.”

Risk mitigation

Due to this, FINMA has implemented institution-specific measures to mitigate these risks, including targeted oversight and enhanced risk management requirements. Broader efforts include on-site inspections and revisions to audit programs, aiming to strengthen defenses against money laundering.

The regulator has also called for clear risk tolerance definitions and effective risk management practices, particularly for institutions dealing with politically exposed individuals or clients in high-risk sectors.

These initiatives are designed to curb vulnerabilities and ensure compliance with anti-money laundering regulations.

Meanwhile, crypto organizations also have stepped up efforts to mitigate money laundering risks associated with the industry. For context, stablecoin issuer Tether, TRON blockchain, and analytical firm TRM Labs recently formed a dedicated financial crime unit to combat the illicit use of the USDT stablecoin.

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