A Guide to Anti-Money Laundering for Crypto Firms

FINMA - The Swiss Financial Market Supervisory Authority

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FINMA The Swiss Financial Market Supervisory Authority

With authority over financial markets, FINMA is responsible for ensuring that financial institutions in Switzerland operate in compliance with the law.

The Swiss Financial Market Supervisory Authority (FINMA) was established on 22 June 2007 as a merger of the Anti Money Laundering Control Authority, the Swiss Federal Banking Commission, and the Federal Office of Private Insurance. FINMA is an independent regulatory body with authority over Switzerland’s financial institutions, including banks, insurance companies, exchanges, and investment schemes. It has the mandate to protect both the function of Switzerland’s financial markets and their creditors and investors: in pursuit of this goal, it works to identify and eliminate criminal activities such as money laundering and the financing of terrorism.

As an independent body, FINMA reports directly to the Swiss Federal Department of Finance and is headquartered in the capital city, Bern. FINMA is governed by a parliament-appointed board of directors and currently led by CEO Mark Branson. The board manages Swiss Financial Market Supervisory Authority’s budget, defines its strategic direction, and maintains contact with Switzerland’s key financial authorities in order to carry out its regulatory function effectively.

What is FINMA in Switzerland and What Do They Do?

To protect participants in Swiss financial markets from money laundering and other criminal activities, and to ensure the financial industry continues to function correctly, FINMA concentrates on four core tasks:

Licensing: FINMA is responsible for authorizing and licensing every company that seeks to operate in the Swiss financial sector. The forms of license available to financial institutions vary depending on the type of financial activity they engage in: license types range from a simple FINMA registration to more intensive ongoing prudential supervision.

Supervision: The Swiss Financial Market Supervisory Authority takes a risk-based approach to its supervision of financial institutions, working to identify threats that could affect individual institutions or the entire financial system. FINMA is particularly vigilant about money laundering and the financing of terrorism and closely monitors the Swiss financial markets for AML/CFT compliance.

In performing that aspect of its supervisory role, FINMA conducts audits and reviews of financial institutions to verify that appropriate AML/CFT measures are in place. These measures include:

  • Developing a risk-based approach to AML/CFT strategy
  • Reporting suspicious transactions
  • Implementing robust screening measures for politically exposed persons, and for clients from high-risk countries
  • Training staff in AML/CFT policy and performing internal inspections

FINMA may delegate some aspects of its supervisory role to third-party audit firms or appointed agents on a case-by-case basis.

Enforcement: Where it finds evidence, FINMA has the authority to investigate violations of its legislation (and other irregularities) and, if necessary, take enforcement actions to restore compliance. The enforcement tools available to FINMA include the confiscation of profits, professional restrictions, and organizational amendments to the companies involved in wrongdoing. In worst cases, the Swiss Financial Market Supervisory Authority may revoke licenses or even liquidate offending companies.  

Regulation: When necessary, FINMA issues regulations to achieve its supervisory objectives. It issues periodic guidance to help financial institutions understand how to comply with FINMA policy and may also enact its own ordinances to set out technical details with greater clarity. FINMA provides its expertise to the government in the preparation of draft laws and contributes to the parliamentary process of developing new regulations.

How Does FINMA Supervise the Digital Economy?

Since the early 2010s, FINMA has taken a proactive approach to its supervision of Switzerland’s digital economy. Recognizing the impact fintech would have on financial services, FINMA introduced a range of new regulations, including legislation to integrate cryptocurrencies into the economy, and a fintech license to ease startups into the same regulatory regime as incumbent financial institutions. FINMA’s approach to digital innovation is ongoing:“The Swiss government and its regulator was one of the first to understand the potential of Blockchain technologies and digital assets. Blockchain enabled e-voting in the City of Zug, which along with numerous proof-of-concepts, led to an influx of foreign talent and the famous ‘Crypto Valley’, which quickly outgrew Zug.

Switzerland’s core regulatory principles are openness, a bottom-up approach, technological-neutrality, legal certainty, clear rules, and combating abuse of those rules. These principles guide targeted adjustments to existing digital economy laws, which in turn allow distributed ledger technologies to benefit every sector.”

Urs Bolt, Expert Advisor in Digital Assets and RegTech

The Swiss government and its regulator was one of the first to understand the potential of Blockchain technologies and digital assets.

— Urs Bolt, Expert Advisor in Digital Assets and RegTech

Beyond Switzerland

One of FINMA’s wider objectives is to enhance the reputation of Switzerland’s financial system and its status as a center of global commerce. FINMA represents Switzerland on the global stage and regularly cooperates with foreign financial authorities in the fight against international money laundering and terrorist financing activities.

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Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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