Swiss FINMA Warns of Bitcoin's Money Laundering Risk

FINMA, the Swiss Financial Market Supervisory Authority, has issued a report warning about the “increased money laundering risk” posed by Bitcoin.

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Swiss FINMA Warns of Bitcoin's Money Laundering Risk

FINMA, the Swiss Financial Market Supervisory Authority, has issued a report warning about the “increased money laundering risk” posed by Bitcoin, along with similar financial technologies and business practices, and suggests “stronger due diligence.”

The report warns specifically about Bitcoin's anonymity and international capabilities that could increase the risk of money laundering and terrorist financing.

This stance sits in contrast to FINMA's relatively relaxed approach to Bitcoin last summer, at which time they referred to the “fairly insignificant” financial weight of virtual currencies.

In June 2014, the financial regulator’s report read, “The economic importance of virtual currencies as a means of payment is fairly insignificant at the moment and the Federal Council believes that this will not change in the foreseeable future.”

Fast forward to May 2015, and the new report by the agency dedicates a full section to Bitcoin specifically. The report discusses how Bitcoin ATMs are used and how the various ways in which they can be used may or may not be considered “money transmitting” under international standards. Translated from German, the report reads:

“In contrast to the money exchange of official currencies, with Bitcoin for any exchange from and to cash, it is not clear whether the receiving and giving parties are the same — due to the anonymity in these exchanges. Thus, it is hardly possible to judge whether a single exchange involves two or three parties, and if Money Exchange or Money Transmission occurred.

“Correspondingly, Bitcoin merchants can only profit from thresholds defining when the operation is a real business, causing requirements regarding [KYC and AML], if technical means can ensure without [a] doubt that two parties are involved in a transaction — meaning that the [known] customers are recipients of the cash/Bitcoin. If this cannot be ensured, the increased risk of money laundering can cause the business to be defined as money transmission.”

FINMA

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