Switzerland’s FINMA warns of money laundering risks with crypto

The Swiss Financial Market Supervisory Authority has warned about money laundering risks associated with cryptocurrencies.

Cryptocurrencies, including stablecoins, are increasingly being used to evade sanctions linked to cyber attacks, payments for illegal darknet activity and geopolitical conflicts, the regulator noted in its 2024 Risk Monitoring report.

Stablecoins in particular have seen a “massive increase” in illegal transactions related to sanctions evasion, further complicating anti-money laundering efforts.

To combat money laundering risks, FINMA outlined its broader efforts, including on-site investigations, an overhaul of its supervisory program and a focus on risk tolerance and management for organizations with politically exposed clients or links to high-risk areas.

Regarding digital assets, FINMA stated that it “takes agency-specific measures to reduce the risk of money laundering” by implementing targeted surveillance to effectively address vulnerabilities.

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

Additionally, the regulator warned that financial intermediaries operating in the crypto sector without appropriate risk management measures could face legal consequences and their reputations could be damaged.

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

In May, the UK Financial Conduct Authority identified cryptoasset companies as among the sectors most vulnerable to money laundering in 2022-23. Therefore, the regulator has implemented a strict registration process for crypto businesses to counter these risks.

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

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

Recently, the company came under renewed scrutiny after reports emerged that the US Department of Justice had launched an investigation into possible violations of sanctions and anti-money laundering regulations. But he denied any wrongdoing and said he had seen “no indication” of an investigation.