Cryptocurrencies and other digital assets are increasingly being misused for criminal purposes, according to a report by the federal government. This is putting financial service providers and other actors who must deal with the new dangers at risk and is becoming increasingly challenging for them.
Switzerland’s interdepartmental coordinating group on combating money laundering and the financing of terrorism (CGMF) has released a report on the increasing risks associated with cryptocurrencies and other virtual assets.
These have evolved into a mass phenomenon over the past ten years, with a significant impact on the financial system and are increasingly being used for criminal purposes.
Losses in the Double-digit Millions
This has led to a big jump in suspicious activity reports on these types of investments to the Money Laundering Reporting Office Switzerland (MROS), according to the Federal Office of Police (Fedpol). It says that nearly 14 percent of all suspicious activity reports were connected to virtual assets in 2022. The MROS is seen as chronically overwhelmed by the high volume of compliance reports from the financial industry.
The losses caused by the misuse of virtual assets were also significantly higher at «at least a double-digit million sum» in 2022, the Fedpol adds. Cryptocurrencies were used for a variety of illegal purposes, ranging from theft and fraud to transnational crimes such as money laundering and the financing of terrorism.
Blurred Boundaries
With the increasing integration into traditional payment platforms, the risks of criminal misuse have soared. In Switzerland, an increasing number of financial intermediaries are offering crypto services. As a result, the boundaries to the traditional financial sector are becoming blurred, the report says.
The coordination group proposes measures in the report to address the growing risks. For example, data and knowledge levels and the reporting behavior of financial intermediaries in the digital asset sector «must be improved and actively promoted.» International cooperation should also be strengthened.
