Legal Basis

In 1998 the Swiss Money Laundering Act entered into force. Contrary to the often-heard opinion in the FINTECH scene, Swiss money laundering legislation applies not only to banks but to all financial intermediaries. Financial intermediaries are not only banks, but all those who professionally engage in business regarding third-party assets. Such financial intermediaries must join a self-regulatory association directly submit to FINMA before commencing their business activities.

Whether something is considered professional or non-professional intermediary activities is irrelevant when dealing with virtual currencies. In its report on virtual currencies in response to parliamentary postulates, the Federal Council [1] made stated clearly that virtual currencies are not money, but units of value with which real goods and services can be obtained and are accepted by a community as means of payment. Due to the fact that assets are thus transferred, such transactions must be regarded as asset-transfer transactions. It cannot be ruled out that three parties may be involved in which one party merely the transaction.

Furthermore, the Federal Council made it clear that, in contrast to the exchange of official currencies, it is generally not possible to determine whether the sender and recipient of such virtual currencies occur are in a bipartisan or tripartite transaction. This based on the fact that when switching from FIAT to virtual currencies anonymity of the participants is most often given.

This makes the distinction between money exchange and money transmitting practically impossible, which is why according to the Federal Counsel money transmitting must always be assumed. Unless, it can be ensured beyond any reasonable doubt that it is exclusively a two-party transaction.

The distinction between non-professional and professional activities is therefore of no importance and the stricter obligations regarding the prevention of money laundering and terrorist financing always apply to such asset-transfer transactions. These increased requirements apply with regard to the verification of the contracting party, the identification of the beneficial owner and the documentation requirements for the transactions carried out.

Obligations in Money Transmitting Transactions

If the transaction qualifies as money transmission, the person carrying out or facilitating the transaction must always verify the identity of the contracting party and identify the beneficial owner. The exemption for one-off transactions, which merely requires professional financial intermediaries to identify clients in transactions exceeding CHF 5,000 is not applicable.

When it comes to the operation of trading platforms it becomes more complicated. The professional purchase and sale of virtual currencies, the exchange into other virtual currencies or the exchange of and into FIAT currency falls under the Money Laundering Act according to AMLO-FINMA Art. 2 lit. c. The same applies to the operation of trading platforms, which merely transfer virtual currencies of one use to another. In the case of such activities, the obligations applicable under the Anti-Money Laundering Act, in particular the verification of the contracting party and the identification of the beneficial owner, must always be observed. This fact has already brought considerable FINTECH business ideas to burst. Virtual trading platforms, however, which only bring together buyers and sellers of such currencies or assign purchase and sale offers to each other, are not subject to financial market laws.

Regulatory requirements in connection with a token issuance

In order to help a FINTECH idea to commercial success it is therefore inevitable to understand and analyze the respective concept and the exact service in detail to avoid sensitive penalties. This applies even more if the FINTECH company plans to issue a token. In addition to money laundering requirements, other legal requirements must also be considered. According to the new FINMA guidelines for ICOs, the issue of token may also require a prospectus or even a securities dealer or bank license.

We will be happy to answer any regulatory or money laundering related questions you may have.

[1] Report of the Federal Council on virtual currencies in response to the postulates Schwaab (13,3687) and Weibel (13,4070)