An overview for banks for the implementation of due diligence

Switzerland – now on board thanks to Crypto Valley – is considered one of the leading blockchain locations internationally. A total of more than 600 companies that deal with the further development of the blockchain universe have taken root here, and within the last two years over 60 of these companies have found funding by means of an ICO. Measured both by the number of companies and the volume of funding, Switzerland is one of the global pioneers.

For the players in this new industry, it is fundamental that access to the financial infrastructure in Switzerland is guaranteed. Currently a large number of Swiss banks are showing a certain reticence when it comes to services relating to cryptocurrency, and particularly entering into business relationships with and acquiring assets from (ICO) companies – and individuals – from the crypto industry.

The whitepaper addresses the topic of the crypto-ecosystem and prevention of money laundering and attempts to provide an overview of the framework conditions of Swiss anti-money-laundering legislation that apply to banks in relation to business relationships and transactions involving cryptocurrencies. After all, although cryptocurrencies are not a legally valid means of payment in Switzerland and are not accepted as such, cryptocurrencies perform the same essential functions as money: They can be used as a means of payment for real goods and services and can be traded freely on crypto exchanges. From a money-laundering perspective, cryptocurrencies thus merit consideration as an instrument or aid for laundering money or funding terrorism and – partly because of the peculiarities of the blockchain technology that underpins them as well as the lack of progress in international regulation – harbour greater money-laundering risks than Fiat currency, depending on the usage case.

Following on from this starting position, the whitepaper presents possible solutions as to how – and with what means – a bank can keep pace with the statutory obligations for the prevention of money laundering in business relationships and transactions relating to cryptocurrencies. The focus here is on new forms and instruments for monitoring and analysis that are aimed at a blockchain-specific transaction analysis and shine a light on the inflows and outflows of assets in particular. This makes it possible to reconstruct the transaction history retrospectively and to trace a coin or token back to its point of origin.

In conclusion, the whitepaper shows that the implementation of effective anti-money-laundering policies for business relationships and transactions that have a direct or indirect connection to cryptocurrencies can be realised from both a regulatory and a technical/organisational perspective. As a result, it is possible for a bank to enter into business relationships with natural and legal persons involved with cryptocurrency and even to offer a broad range of services in this area.

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