The Swiss regulator, FINMA, was one of the first regulators to issue its own guidance on the application of the Travel Rule to virtual asset service providers (VASPs) in August 2019, with stricter rules than the FATF. The guidance highlights that Switzerland has always applied the Anti-Money Laundering Act to blockchain service providers (VASPs).
The guidance also clarifies that Article 10 AMLO-FINMA, which requires that information about the originator and the beneficiary be transmitted with payment orders, is applicable to financial services based on blockchain technology (VASPs).
Download the Swiss Travel Rule Overview by EY and 21 Analytics
What is the scope of the Travel Rule in Switzerland?
Article 2 of the Anti Money Laundering Act (AMLA) defines which entities/activities are in scope. It should be read in conjunction with the related FINMA circulars and guidances, and in particular for the application of the Travel Rule, with FINMA Guidance 02/2019 “payments on the blockchain”.
According to Article 7 of the Anti Money Laundering Ordinance (AMLO), a VASP is deemed to practice its activity professionally should it fulfil any of the following:
achieve a gross revenue of more than CHF 50,000 per calendar year;
have established business relationships with more than 20 contractual parties per calendar year;
have unlimited control of third-party funds in excess of CHF 5 million, or
perform transactions at a volume of more than CHF 2 million per year.
Who is the supervisory body for VASPs in Switzerland?
Swiss Financial Market Supervisory Authority (FINMA)
Self Regulatory Organisations (SROs)
What is the Travel Rule threshold in Switzerland (FINMA)?
CHF 0
What are FINMA's requirements for information to be exchanged?
originator's name;
originator's account number, where an account is used to process the transaction. If no account number is available, a transaction reference number should be provided;
originator's address, official personal document number, customer identification number or date and place of birth.
beneficiary's name;
beneficiary's account number.
In Swiss domestic transfers, the required information can be limited to the originator's account number or a transaction reference number (transaction ID, for example) - as long as the complete information can be provided within 3 days upon request from authorities or the counterparty.
Self-hosted wallet obligations
The Swiss Regulator goes further than the FATF and has imposed stricter requirements on VASPs transacting with self-hosted wallets. Indeed, VASPs have to verify the identity of the beneficiary of the transfer, which concretely means:
for transfers to or from an external wallet belonging to an existing onboarded customer, VASPs will have to verify that the customer has the power of disposal over the assets held in the external wallet;
for transfers to or from an external wallet belonging to a third party, VASPs will have to verify the identity of the third party as well as establish the identity of the beneficial owner, and verify that the third party controls the external wallet.
FINMA requires that the proof of ownership should be done using “technical means”. There are different ways to do so, such as the “Satoshi Test”, or signed messages using the private key (read more about these methods here). Each option has weaknesses when it comes to security, privacy, user experience or adoption.
The graphic below compares the methods to help you understand why we developed the most customer-friendly and compliant option: Address Ownership Proof Protocol (AOPP).
When do you need to comply with the Travel Rule in Switzerland?
Now.
Which regulations are applicable to the Swiss Travel Rule?
Article 10 AMLO
What else do you need to know about the Travel Rule in Switzerland?
“Blockchain service providers” are subject to AML Regulations which include for example, “to verify the identity of their customers, to establish the identity of the beneficial owner, to take a risk-based approach to monitoring business relationships and to file a report with the Money Laundering Reporting Office Switzerland (MROS) if there are reasonable grounds to suspect money laundering”.
