Blockchain technology receives a lot of praise on a global level. In Switzerland, that situation is slightly different. FINMA, the country’s regulator, recently warned how this technology could end up facilitating money laundering ventures.
The Dark Side of Blockchain
Most people consider blockchains to be transparent ledgers. Their use cases can span data storage, recording financial transactions, and introducing new authentication solutions. Not all distributed ledgers are designed to be transparent and publicly auditable by default, however.
The dark side of blockchain comes in the form of criminal activity potentially facilitated by this technology. Switzerland’s financial regulator sees numerous money laundering problems ahead in this regard. In FINMA’s opinion, blockchains will attract the world’s wealthy, yet potentially lead to more financial crime in the future.
Financial institutions flock to this technology to achieve efficiency gains and transaction speeds. However, the perceived anonymity of distributed ledgers can be a valuable tool for money launderers and individuals financing terrorism.
These same banks may – potentially unknowingly – facilitate this type of behavior. Due to tightening margins and smaller profits, these institutions could be enticed to accept clients who might hail from “risky” countries. Any client caught up in a scandal will reflect upon the financial institutions they do business with.
A History of Scandals
Despite being perceived as a strong financial industry, Switzerland had its share of scandals in recent years. Particularly in the past few years, there have been multiple problematic incidents involving numerous financial institutions.
Several domestic banks have been caught up in the 1MDB scandal, as well as the Petrobras case. In virtually all cases, the banks did not conduct the necessary due diligence and compliance to avoid dirty money streams.
Making matters worse is the recent court decision to negate a $96m fine levied by FINMA. That penalty was imposed upon BSI Bank due to its ties to the 1MDB scandal. Despite proving multiple violations of supervisory provisions, the court ruled how the penalty was incomprehensible. The court case is still ongoing, however.