Recently, Switzerland, through the Swiss Financial Market Supervisory Authority (Finma), issued additional guidelines to clarify the country’s position regarding AML/KYC requirements, in relation to the application of the travel rule in blockchain transactions.
The guidelines were issued after the determinations of the Financial Action Task Force (FATF), demanding that the so-called “travel rule” be applicable to blockchain transactions. This means that whenever a financial institution executes transactions on behalf of its customers and the value is greater than 1,000 dollars or euros, the transfer must contain basic information about the sender, the recipient, and the purpose of the transaction. In addition, the identity of the client must always be checked.
Other important points determined by FINMA:
- There will be no exceptions to DEXs or unregulated custodians.
- It is not necessary that the information (for example, customer KYC information) is transmitted in the blockchain. Transmission can occur through other communication channels.
In addition, the ownership of the external wallet must be proven by appropriate technical means. Thus, if the customer is performing an exchange (fiat money for virtual, virtual currency for fiat or virtual currency for virtual) and an external wallet is involved in the transaction, the customer’s ownership of the external wallet must also be proven using appropriate technical means.
Transactions between clients of the same institution are also allowed. The submissions or receipts to an external wallet belonging to third parties are only possible if, as in the customer relationship, the supervised institution has first verified the identity of the third party.
In addition, the identity of the beneficial owner and the property of the third party in the external wallet must be established using appropriate technical means. With this, the perspective is that the exchanges will continue to perform due diligence, so that they can apply trust criteria and rely on the AML checks and controls from each one.