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Crypto Compliance in Switzerland: A Comprehensive Guide

Sep 27 2023

In the ever-evolving landscape of the crypto industry, being compliant with regulatory requirements is crucial. As governments and financial authorities establish frameworks to govern cryptocurrencies, it is essential for businesses and individuals operating in this space to stay informed and adapt to changing regulations.

Key Point Summary

Major Compliance Requirements in Switzerland

Switzerland has emerged as a leading global hub for cryptocurrency and blockchain technology. Thanks to its favorable regulatory environment, pragmatic authorities, stability and low taxes, the country has attracted a significant number of businesses and investors operating in the crypto space.

To ensure compliance with Swiss regulations, it is important to understand the major requirements for crypto compliance in Switzerland. Here are the key aspects to consider:

  1. Registration and Licensing
    Crypto businesses such as exchanges, token issuers, payment agents, and other service providers are required to register with a Self-Regulatory Organization (SRO) or become licensed by the Swiss Financial Market Supervisory Authority (FINMA) depending on their business offering. In particular, SRO registration is a very lean, fast, and inexpensive way to become a fully regulated virtual asset service provider (VASP) in Switzerland.

  2. Anti-Money Laundering (AML) Regulations
    Swiss regulations require financial intermediaries to implement robust AML measures. This includes conducting thorough customer due diligence, verifying the identity of users, performing sanctions checks, and implementing transaction monitoring systems to detect and report suspicious activities.

  3. Regulatory Reporting
    Crypto businesses are obligated to comply with reporting requirements set by SROs or FINMA. This includes submitting regular reports on their operations, financials, AML measures, and compliance with regulatory obligations.

  4. AML Risk Assessments
    Crypto service providers of a certain size are required to conduct ongoing risk assessments to identify and assess the AML risks associated with their operations. This involves evaluating the potential risks of money laundering, terrorist financing, and other illicit activities and implementing appropriate risk mitigation measures.

  5. Ongoing Compliance Monitoring and Training
    Compliance is an ongoing process. Crypto businesses in Switzerland must continuously monitor their customers and update their compliance measures to align with changing regulations. Regular staff training on AML, sanctions, and other compliance topics is essential to ensure a culture of compliance within the organization.

  6. Data Protection and Privacy
    Compliance with data protection and privacy regulations is essential. Businesses must ensure the secure storage and handling of customer data, adhere to the principles of data minimization and purpose limitation, and comply with the Swiss Data Protection Act (DPA) and the General Data Protection Regulation (GDPR) if EU customer data is handled.

Consulting Experts

It is advisable for crypto businesses operating in Switzerland to consult with legal and regulatory experts to ensure a full understanding and compliance with specific requirements imposed by authorities. By adhering to these requirements, businesses can operate within the Swiss regulatory framework, gain trust from customers and investors, and contribute to the growth of the well-established crypto industry in Switzerland.

Compliance

Effective Strategies for Compliance

Keeping Up with News and Regulations

Being informed about the latest regulatory developments and upcoming rules is essential. Here are effective ways to stay up-to-date on the dynamic regulatory landscape of the crypto industry:

1. Engage with Authorities

  • Monitor Regulatory Updates: Regularly consult relevant websites and subscribe to newsletters of regulatory bodies such as financial regulatory agencies, central banks, and government entities.
  • Participate in Public Consultations: Consultations provide opportunities to provide feedback and express concerns. Participating in consultations allows businesses to stay informed and even contribute to shaping the compliance landscape.

2. Follow Industry Associations and Communities

  • Join Associations: Become a member of reputable industry associations and organizations. These associations often provide access to regulatory experts, conduct webinars and conferences, and publish industry reports that shed light on the latest compliance requirements.
  • Participate in Forums: Engage in online forums and discussion boards dedicated to compliance in the crypto industry. Sharing experiences with fellow professionals facilitates knowledge-sharing and provides insights into regulatory developments.

3. Collaborate with Peers

  • Participate in Networking Events: Attend conferences, seminars, and industry events where professionals in the crypto space gather. Networking with peers, compliance experts, and service providers offers knowledge exchange, sharing insights, and discussing the impact of the latest regulatory developments.
  • Maintain Close Relationships with Service Providers: Forge strong relationships with compliance service providers to stay updated on product enhancements, new features, and compliance-related developments. Learning how to efficiently handle compliance tasks is a key asset.
  • Stay Updated on Community Publications: Various guidelines and announcements related to compliance are regularly published and commented on online. Getting information and publications from law firms and compliance experts is helpful. Many of these experts publish content on LinkedIn.

4. Invest in Continuous Education and Training

  • Attend Webinars and Workshops: Participate in webinars and workshops conducted by regulatory authorities, industry associations, compliance experts, and legal firms. Such events provide in-depth insights into the latest regulatory updates, case studies, and practical guidance for compliance professionals in the crypto space.
  • Enroll in Courses and Certifications: Invest in specialized online courses and certifications that focus on compliance in the crypto industry. These courses cover topics such as regulatory frameworks, risk assessment methodologies, transaction monitoring, and best practices.

Working with Consultants

Selecting a best-in-class compliance service provider is crucial for addressing compliance concerns effectively. Here are key factors for a successful selection:

1. Reputation and Track Record
Research the service provider’s reputation, experience, and track record in the crypto industry. Look for testimonials, case studies, and customer feedback to assess their reliability and effectiveness in addressing compliance concerns.

2. Compliance and Regulatory Knowledge
Assess the service provider’s knowledge of compliance regulations and their ability to stay updated with regulatory changes. Inquire about their compliance practices, data security measures, and certifications to ensure alignment with industry standards.

3. Efficiency
Learn more about the service providers' offerings, fee model, and potential conflicts of interest. Choose a provider running a risk-based approach and focusing on working with IT tools instead of manual work.

4. Technological Expertise
Evaluate the service provider’s technological capabilities, including their data analysis tools, machine learning algorithms, and system architecture. Ensure they have a comprehensive understanding of the crypto landscape and possess the technical expertise to adapt to emerging trends.

5. Collaboration and Support
Determine how the service provider collaborates with compliance specialists and their commitment to incorporating feedback and suggestions.

Compliance Software Solutions

Compliance software solutions play a vital role in streamlining and automating compliance processes. Such solutions simplify and streamline compliance processes, allowing businesses to maintain a high level of compliance efficiency and effectiveness.

Key Features of Compliance Software Solutions

  1. Customer Onboarding

The onboarding process for customers is critical. Exposed customers and illicit assets must be kept away, compliance requirements must be met, and the drop rate should be minimized by offering a fast process and a pleasant user experience. Compliance software helps to meet all requirements at once.

  1. Compliance Checks

Compliance software automates the customer due diligence process, alleviating the burden of manual checks. It performs identity verification and screens clients against sanction lists and watchlists to ensure adherence to AML regulations. By automating these checks, compliance software significantly enhances the accuracy and efficiency of the due diligence process.

  1. Client Risk Profiling

Software solutions integrate client information based on data sources such as transaction records, public databases, and sanction lists. AML officers and legal advisors can define risk criteria in line with regulatory requirements and internal policies. Factors such as transaction volumes, jurisdictions, business types, and previous compliance issues are made available to generate an objective risk score to categorize clients into high or standard risk.

  1. Transaction Monitoring

Real-time transaction monitoring is critical for compliance. Smart solutions are designed to match client bank accounts and blockchain addresses with their transactions. Such matching is a prerequisite for continuously monitoring transactions, utilizing advanced algorithms and pattern recognition to detect suspicious activities promptly. When potential red flags are identified, the software generates alerts, enabling AML officers and legal advisors to initiate further investigations promptly.

  1. Compliance Reporting

Compliance software simplifies the arduous task of generating comprehensive reports for regulatory authorities. With built-in reporting functionalities, it automates the process, ensuring accurate and timely submission of compliance reports.

Our Plug-and-play AML & KYC solution

In order to deals with the burden of crypto compliance we have developed MarketGuard. What makes it outstanding in dealing with AML and KYC compliance is its multiple integrations with third-party service providers such as banks, crypto exchanges, and crypto custodians to collect all transactions into a single database, significantly reducing manual processing. MarketGuard carefully selects best in class solutions developed by regulatory experts dedicated to swiftly updating their products in response to new regulatory updates. These solutions are designed by teams who possess in-depth knowledge and understanding of the regulatory landscape. As soon as new regulatory updates become publicly available, the necessary changes are promptly implemented on the platforms to ensure compliance products remain up-to-date.

By leveraging MarketGuard technology, clients can benefit from the agility and speed at which the compliance solutions are adapted to the evolving regulatory environment. Additionally, MarketGuard supports several formats of AML reporting, including those adopted in the target DACH region as well as Lithuania and Poland.

Conclusion

Staying crypto-compliant is crucial for businesses and individuals operating in the crypto space. By staying up-to-date with news and regulations, working with consultants like JayBee AG, and utilizing compliance software solutions such as MarketGuard, businesses can navigate the regulatory landscape effectively. Adhering to compliance requirements not only ensures timely adjustment of strategies and mitigates the risk of legal and financial sanctions but also prevents unfavorable investments and enhances trust and credibility within the crypto industry.

For requesting more information about how we can help reach out to us. We're here to help and answer any questions you may have.

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About the Authors

Jürg Baltensperger is a regulatory expert with a focus on compliance, risk management, and corporate governance. As managing director of JayBee AG, he supports companies in obtaining the right license, strengthening their regulatory set-up and processes, adapting to new regulations, remediating regulatory legacy, and enabling clients to work on their future. Additionally, Jürg is engaged as a lecturer at the universities of Applied Science of Zurich, Lucerne, and Winterthur.

Maya Gozman is the COO of FineryTech, a holding company that owns FinchTrade and FinchGuard. Maya has extensive experience in financial markets operations and treasury management and contributes to creating advanced AML compliance software for the blockchain industry.