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JMLC
25,3 Anti-money laundering regimes: a
comparison between Germany,
Switzerland and the UK with a
656 focus on the crypto business
Christoph Wronka
Deloitte and Touche GmbH Wirtschaftsprüfungsgesellschaft, Hamburg, Germany

Abstract
Purpose – This paper aims to examine the framework for the regulation of crypto assets in Germany, the
UK and Switzerland focusing on anti-money laundering (AML) laws. It comprehensively addresses the risks
of crypto assets and the benefits along with the changes made to the existing laws to regulate cryptocurrency.
Design/methodology/approach – Qualitative data was analyzed to collect information for the case
study and to challenge/examine the existing data and statistics.
Findings – The findings suggested that the AML laws are additionally modified to include the
cryptocurrencies violations of the legislation, as it is the decentralized financial systems generating
opportunities for crimes and terror financing. The moderate or mild laws were found in Switzerland following
Germany and the UK has the most traditional and stringent laws of money laundering.
Originality/value – The paper has focused on the comparison of the three states in their AML laws
comprehensively along with their attitude toward the crypto businesses.
Keywords Financial regulation, Cryptocurrencies, Anti-money laundering laws, Germany,
Switzerland, The UK
Paper type Research paper

1. Introduction
This paper will critically examine the anti-money laundering (AML) regimes of Germany,
Switzerland and the UK with a special focus on the “crypto businesses.” There is a
framework for the regulation of crypto businesses to avoid money laundering. In actual,
there is no special law for cryptocurrencies, but the AML laws handle the same. Crypto
businesses raise two main challenges; the first challenge is the high risk of financing
terrorism and the second challenge with the crypto businesses is the regulation in addition
to centralization under the regulations of the state (Buttigieg et al., 2019; Boehm and Pesch,
2015). AML laws modified to have the crypto businesses under government control are
insufficient to address all the provisions of cryptocurrencies and their characteristics.
Cryptocurrencies are decentralized, and hence, the businesses based on these virtual
currencies are also decentralized in terms of payments/transactions and databases. This
causes pressure on the state to track down all the transactions and keep the record. The
legitimate use of cryptocurrencies has become a challenging task for the states and there are
some banks that have refused to accept cryptocurrencies as an exchange, to avoid coming
Journal of Money Laundering
Control
under the scrutiny of the state AML laws and their provision of knowing your customer
Vol. 25 No. 3, 2022
pp. 656-670
(KYC) (Preller, 2008). One of those banks is HSBC in the UK which has stopped accepting
© Emerald Publishing Limited cryptocurrencies. Contrary to banks, the business circles are promoting the use of
1368-5201
DOI 10.1108/JMLC-06-2021-0060 cryptocurrency due to the expectation of its efficacy and use in the businesses for several
reasons; it is a very fast exchange option, there is a Peer-to-Peer (P2P) transfer option Anti-money
concealing the transaction to track down and decentralization leads to reduce or even evade laundering
taxation (Al-Kadri, 2018–2019).
The paper will also identify some of the risks associated with crypto assets and the
regimes
insufficient laws present in these countries regarding cryptocurrency. There is an ambiguity
in the use of crypto culture, least information and guidance to stop or at least spread
awareness about legal or illegal activities in the terms of cryptocurrency and money
laundering. The paper also delves into the challenges associated with the money laundering 657
precautions and the crypto business, which are growing at a very rapid pace owing to the
recent outbreak of the Corona pandemic and the world going digital abruptly in response to
the social distancing and shutting down of the physical markets to avoid the spread of
pandemic exclusively. The study is important in that it is arguing that it is the high time of
framing the crypto businesses under the laws of the states and bring a revolution in their
conduct has arrived. There has been already working started to that end. This article will
explore cryptocurrencies in general and how they operate, what are the challenges with
money laundering. It will also explore how the laws protect the system through checks on
money laundering and promoting the stability of the state and how the laws have failed the
new revolutionary form of digital currency. The UK, Germany and Switzerland are taken as
case studies, where there are convergences and divergences in the AML laws of all three
states along with stark differences in attitude toward cryptocurrencies. For instance,
Switzerland is a crypto valley and encourages the cryptocurrency exchange in businesses
while Germany is restricting it through different provisions but the public is aware. The law
of the UK is most harsh for cryptocurrencies where there is a massive track down on the
money laundering activities and the use of digital currency.

2. Research methodology
Due to the lack of concrete statistics over the misuse of cryptocurrency assets this paper will
focus on the data related to the regulatory and legal debate of cryptocurrencies and
blockchain-based products. The research is focusing on the legislation of AML laws and
their link to the new currency businesses and their efficacy to control or help these
businesses flourish and the three case studies as models to know the limits of the states and
their effects on their laws.

3. Literature review
3.1 What exactly is cryptocurrency?
Before introducing the AML laws of the countries that are studied in this research, namely, the
UK, Germany and Switzerland, the cryptocurrency is explained comprehensively and the
methods of its use. Digitalization makes the tasks easier and convenient, but it also hampers
the traditional regulatory approaches (Al-Kadri, 2018–2019). The recent digitalization of
currency has stirred a debate in its capacity on the negative side. It has revolutionized
transnational businesses and at the same time crimes (Lee, 2019). The rapid and frequent
transfers and the system of regulations in the transfer have generated problems for states to
verify the money transfers as legal or illegal. There is an uncertain environment for the
investors in navigating through the regulatory landscape (Al-Kadri, 2018–2019). For instance,
China has recently banned cryptocurrency businesses and online payment channels and these
banned services consist of registration, trading, clearing and settlement, albeit it did not ban
people from possessing the digital currency (Reuters, 2021).
The cryptocurrencies started from 2009, among which the most famous are Bitcoin,
SETLcoin, Solar coin and Liberty Reserve (Diereksmeir and Seele, 2015). They are termed as
JMLC a threat for the financial systems due to their decentralized system but at the same time
25,3 advantageous, ambiguous and harmful for the state (Boehm and Pesch, 2015; Diereksmeir and
Seele, 2015). There is a lot of misinformation for the consumer and this misinformation creates
many problems. Cryptocurrency boomed in 2017, attracting consumers and media attention
(Al-Kadri, 2018–2019). There is a need of regulating the cryptocurrency transfers and building
a uniform framework to avoid misinformation and usage, as well as satisfactory oversight of
658 the government (Al-Kadri, 2018–2019).
Virtual currency is electronic money not funded by the government and there is no
record of this money in the central bank of a country. Virtual currency offers many
advantages over traditional money, including but not limited to low fees and fast transfer
(Jafari et al., 2018). The virtual currency is defined by the Financial Crimes Network as the
medium of exchange not legalized under any tender and has no jurisdiction over such
money (Boehm and Pesch, 2015).
There are two types of virtual currencies, one is non-convertible, generally used in games
and online stuff, the second one is the currency through which you can purchase and sell
and is convertible because it is under the legal tender (Jafari et al., 2018). This is the
cryptocurrency, which has a security setup and the currency transactions are controlled. It
works on the technology of blockchain. The transactions are albeit anonymous and the
technology of blockchain tends to do this job (Hassani et al., 2019). Since 2009, Bitcoin has
become famous, which is a type of cryptocurrency (Diereksmeir and Seele, 2015). In reality,
there are thousands of cryptocurrencies. Unlike the centralized system of e-gold previously,
the crypto-currency is decentralized and the P2P technology is used, helping in the
anonymity of transactions (Buttigieg et al., 2019; Suciu et al., 2019; Diereksmeir and Seele,
2015). This aspect makes it difficult for law enforcement agencies at different levels to
regulate the financial system. The consumer-investor protections were challenged as well.
The second challenge with cryptocurrency is the harboring of terrorism and other criminal
activities including money laundering and tax prevention (Buttigieg et al., 2019). This
challenge is forcing the states to implement laws and regulations to control money
laundering.
Malta a smaller state of the EU is a good example of making a framework for the AML
and fight against terrorism financing. EU also possesses such a regime for regulating the
cryptocurrency and, as two of the countries under the study are the EU countries, we will
have a look at this regulatory law to place our study in its context (Buttigieg et al., 2019). The
UK, Switzerland and Germany are at high risk of money laundering concerning crypto
assets. Malta has created the EU Distributer Ledger Technology system and regulatory
framework. This has provided legality and certainty to the crypto environment.
There is rapidly developing literature on the subject in the context of AML and
combating financing terrorism. This paper will add to the existing knowledge by comparing
the three states and their models of AML regimes and the effect they could have over the
crypto businesses. How is the integration going on and when will the states be able to
control their own economic sphere and be sure to track all the account holders under the
national net of the economy (Buttigieg et al., 2019).

3.2 Blockchain technology

Whenever the payment transactions take place, the cryptocurrencies bank on blockchain
technologies to develop a system, through which the transaction distributed, is with
integrity (Kimani et al., 2020). It allows countless people, organizations and businesses to
store their data in a transparent manner without the fear of alteration and public authority
(Suciu et al., 2019). If we consider fiat money, it is the trusted money generated by the central
bank guaranteeing the value of banknotes and currency. The stock exchanges monitored Anti-money
are through the central security system, transcribed and provide evidence of the legitimate laundering
owner. On the contrary, blockchain technology is digital and decentralized (Kimani et al.,
2020). The distributed ledger technology writes all the transactions and all the network ends
regimes
have a copy of that transaction and no one can update that. Blockchain technology muddles
up to provide security accuracy and immutability of the transactions (Adhami et al., 2018;
Lee, 2019).
The blocks recorded are with each transaction without any requirement of third party 659
involvement, e.g. a bank or an agent and this block upgrades account positions of parties
involved and data generated is on the shared ledger (Lee, 2019). Blockchain technology
became interesting for the world because of the expectation that it will deliver through
decentralized information storage (Kimani et al., 2020). The settlement achieved is through
the consensus protocols applied by the network participants on the other end.
Blockchain technology is beneficial for its tolerance for mistakes, resistance to attacks
due to being expensive and resistance to colliding with third parties, as there is no need for
third parties to conduct transactions (Boehm and Pesch, 2015). The distributed systems are
time-consuming and superfluous than centralized systems, and hence, is difficult to scale
and manage the transactions (Adhami et al., 2018).
These technologies used are for money laundering. The next heading covers the debate
of money laundering and the strings attached to its use and misuse owing to the rapid
digitalization of the globe and the new types of threats and risks in the physical world and
cyberspace. A famous dictum goes on; the future of warfare in cyberspace. Cryptocurrency
is also a digital currency used through the internet.

3.3 Money laundering

Why has been money laundering a matter of concern more than ever? The money
laundering issue was highlighted in the year 1998 by the director of IMF to be 2%–5% of
the global GDP (Preller, 2008). For instance, the illicit Russian funds were transferred to off-
shore companies by the “Troika Laundromat” discovered by the Organized Crime and
Corruption Reporting (Tiwari et al., 2020). Alongside the Oil Company “Shell” laundered
£80bn of stolen funds in merely 4 years, in the UK between 2010 and 2014. Hence, money
laundering has become the third-largest business in the world (Preller, 2008).
The act of giving legitimacy to the wrong means of wealth is money laundering (Boehm
and Pesch, 2015). As we wash our clothes to clean them in the laundry, money is cleaned
through laundering it as well. This is usually done through transferring it illicitly to some
other place. The UN Convention of 2000 defines it as the process of concealing the money
obtained through corrupt means and transferring it to save it and integrate it into the
system without the knowledge of the central bank or the financial authorities (Tiwari et al.,
2020). Apart from illegal and concealed funds transfer, there are activities of concealing the
money from the public authorities burdening the financial system and producing vague
economies promoting money laundering.
There are three steps in the money laundering process; the placement of the funds, the
layering of those funds and the integration (Preller, 2008; Keramidas, 2006). The monitoring
of money laundering has become very prominent after the spread of cryptocurrency in that
it has a great potential of tax evasion. Before cryptocurrency as well, the issue of money
laundering was there. The gravity of the issue required a global response, and hence, there
was the UN convention in 1988 against narcotics and such activities and this was known as
the Vienna Drug convention. This Convention provided an opportunity to prosecute the
drug traffickers. The Group of Seven (G7) formed a task force by the name Financial Action
JMLC Task Force formed in 1989 to combat the growing problem (Tiwari et al., 2020). This task
25,3 force provided many other instances of illegal money transfer and businesses, for instance,
illegal arms trade, bribery, fraud and inside trading. It has been expanded further and terror
financing has also been included in this regulation. At a global level, the data leaks such as
Panama, Paradise papers and offshore leaks have drawn attention toward the huge scale of
money laundering. Consequently, it becomes important to initiate some work around these
660 lines at a global level (Tiwari et al., 2020).

3.4 Threat, vulnerabilities and typology of money laundering

The new technology of digital money is vulnerable, to be misused and taken advantage of.
This vulnerability can give the chance to the perpetrators, of mischief. Now, why money
laundering is injurious for the economy of a state? This is not only the illegal fund’s transfer
and non-regulatory environment created but also the country loses its money. The money
rolling inside a country is more beneficial than the money sent abroad to another country.
Other than that the misuse and exploitation also risk the state. The cryptocurrency system
initiates many cyber threats and generates uncertainty and irreversible transactions. As
these transactions cannot be monitored centrally, so they cannot be tracked. This has made
it easier to take the crime globally through the distributed ledger technology. The
consumers and sellers are both virtually connected and the consumers can use their digital
wallets to transfer funds and assets through just having internet access and a personalized
account (Lee, 2019). The uncensored cryptocurrencies ensure integrity and cannot be read
by third parties and these currencies operate on a global level. This method makes it
vulnerable to fraud and criminal activities. Actually, the cryptocurrency is working on the
principle of anonymity, decentralization and a lack of accountability. These factors make
this platform concealed and convenient to carry out such operations instantly that could not
be thought of before. These senders and recipients do not necessarily require identification,
are usually anonymous, and thus pose a danger of unidentified sources of funds transfer
(Boehm and Pesch, 2015). There are some methods to decode the blockchain method
transactions such as Bitcoin, altcoin, but the privacy coins such as Monero, Zcash and Dash
and off-chain Lightning Network, Plasma etch and tumbler like shapeshift pose greater
challenges of fake name transfers and anonymous exchange. The KYC depends on
customers identification unavailable in this system, and thus imposes limitations of tracing,
identifying or monitoring suspicious and concealed transactions for money laundering.
Even if there is suspicious activity, due to the anonymity and P2P transactions it becomes a
challenge to enforce, freeze or hold the assets. The digital exchanges especially in the
privacy coins create s cryptosystem that generates and promotes anonymity in transactions,
as well as the ownership of the crypto assets. The alt-coins are also privacy-focused and
preserve anonymity. There is a system of hiding the details of the recipient and the sender
(Boehm and Pesch, 2015). Some of the businesses in the cryptocurrency like the Z-cash do
not solely provide anonymity, but it has an option of anonymity or showing the information
of the transactions (Lee, 2019). The privacy coins provide such options through which the
real source of payments is concealed through murky relationships with the DLT addresses
allowing the asset holders to send and receive cryptocurrency anonymously. The tools of
anonymizing like mixers and tumblers facilitate such transactions and provide an extra
layer of protection, thus making the exposure more difficult. Mixers and tumblers such as
CoinJoin and DarkWallet jumble up all the transactions to hide the actual flow of funds.
Mixing is not solely illegal but through these methods, a significant amount is used for
money laundering (Hassani et al., 2019). Hence, the law enforcement of money transfers and
the authentication of the earnings has become a challenge for the agencies of law
enforcement. Crypto markets are at great risk of criminality. The hidden use of privacy Anti-money
coins and crypto assets has become an evolving threat in that it has been linked to the laundering
cybercrimes such as ransomware, hacking and wallet exchanges. The unregulated ATMs of
Bitcoin, prepaid crypto cards, chain hopping and online gambling facilitate the crypto
regimes
money (Boehm and Pesch, 2015). Off-chain transactions are the most emerging methods of
payments chains where P2P transactions and multi-signature technology are used. The
movement of coins between two chains is also possible which are not available on the DLT.
These generate the KYC and Money laundering and Terror financing repercussions, as they 661
are not visible on the DLT, they will be visible only to the user end.
Until now there has been no stark presence of crypto assets by the terrorist organizations
or funding for them, but as the cryptocurrency is recently emerged risking the abuse of this
method. The anonymity feature would not only be attractive to the criminals but also to the
terrorists (Hassani et al., 2019). A case of terrorist financing occurred where the organization
was proposing its supporters to donate through its digital wallet. The digital wallet address
was continuously changing and becoming harder to trace. The volume of funds was
minimal, despite the amount of people, not following any regulations as per their method of
funds transfer and usage, use being negligible crypto space. All people including the crypto
users, the issuers of assets, the exchanges and the trading platforms, wallet providers and
administrators are involved. The key players need to take under scrutiny to apply the AML
and CFT regulations and to minimize the threat and risk of abuse of the cryptocurrency.
There are numerous challenges posed to the regulatory authorities in the form of anonymity
and decentralization of cryptocurrencies (Boehm and Pesch, 2015). There are many
initiatives of finding solutions for the issue and develop intelligent solutions to facilitate the
monitoring of the assets.
If there is a ban on the cryptocurrency businesses, this would not mean the shutdown but
rather the invisibility of the banned activities. The individual jurisdiction has given rise to
homegrown regimes. These regimes need to be under the regulations through a global
approach (Buttigieg et al., 2019).

3.5 Crypto businesses and its benefits

The long debate and issues around crypto businesses raise the question that why the
businesses use cryptocurrency in the first place? The answer to this question lies in the
explanation of the usage of this currency and the attached advantages (Adhami et al., 2018).
The initial coin offerings (ICOs) are the open calls for funding and are later sold on the
internet in the form of tokens, usually to earn money. The token is in the form of ICOs
(Zellweger-Gutknecht and Seiler, 2020). An example of this token is the Mobile Go project.
The ICO earned US$5.3bn globally until 2017. The portals like crowdfunding and
Kickstarted earned a total of US$3.4bn dollars and US$483m from their selling of ICO.
The ICO is relevant to businesses for a number of reasons, namely, the blockchain
technology used in sending and receiving the cryptocurrency can be used to minimize the
costs of raising capital and spending money on intermediaries and agents for payments like
the bank’s credit cards, etc. (Zellweger-Gutknecht and Seiler, 2020). The ICO’s also favor
decentralized businesses and original customer feedback in a positive manner. The third
important aspect is the token method allowing the fund transferor to develop a market for
investment while the traditional markets are completely different and contract-based. This
success of ICO is challenging the business circles in the world (Suciu et al., 2019). This may
include the finance researchers, the entrepreneurs, investors and the authorities controlling
the market. There is already fraud and scams going on in the world with no focus on the
protection of the contributors. The information is also concealed. The financial security is
JMLC not clear and the exchange of ICO with money is not so safe. Apart from all these strings
25,3 attached with such type of currency and business, the ICO represents many opportunities
for new projects. The projects of ICO usually emerge in the USA, the UK, Canada and
Russia. These tokens give the rights of platform access (68%), power to govern (24.9%) and
profit rights (26.1%).
The UK and Switzerland are among the pioneers of the digital era. Europe, since 2018,
662 has a partnership of Blockchain to deliver cross-border digital public services. The new
businesses developed through blockchain were covered with this strategy (Suciu et al.,
2019).

3.6 Terror financing and the crypto environment

While some nations have been directly involved in combating terrorists, many are involved in
the fighting against financial terrorism. The assets required to conduct terrorist activities need
money and this money is earned through different unlawful means. The combat against
terrorism financing is a daunting task requiring sufficient money. The amount spent on
tracking terror financing is often justified when weighed against the terrorist attacks and their
costs. For this reason, this is considered to be a great cause. The EU suffered from numerous
small scale terror-mongering attacks, and hence, there is a strong debate over the combat of
finances. The infrastructure when found can also be weakened and the terrorists can be
weakened in this way. The legal sources of cryptocurrency consist of real estate investments,
labor salaries and stock market investments (Zellweger-Gutknecht and Seiler, 2020). On the
other hand, the illegal activities might involve fraud, drug trafficking, theft and robbery,
kidnapping and money laundering. Legal sources are used by smart terrorists, this may help
them evading scrutiny and get caught easily. The law enforcement agencies focus mainly on
the fund’s transfer to track down the records. Many of the transfer methods are used by them, a
mixture of legal and illegal ones. The fight against this menace needs to be a global initiative
by the nation-states.

3.7 Crypto businesses

The hub of blockchain and cryptocurrency projects is the EU, where in 2018 there were US
$4.1bn projects of ICO and the countries of the UK, Germany and Switzerland owe the share of
the top 10. There are IT experts, as well as a regulated and safe business environment. The
reason of these countries prospering is that they have allowed legitimate blockchain businesses
to run and function as normal companies (Lee, 2019). The EU legislation exempted the digital
currencies from VAT in 2015. Moreover, in 2016 European Commission proposed to amend the
AML Directive to drag the cryptocurrency exchange platforms under the regulations and help
prevent terrorist funding and money laundering. The FinTech action plan was enabled for the
member states to get the advantage of blockchain technologies, Al and cloud services, forming
the EU blockchain Observatory Forum. The purpose of this forum is to identify the challenge
and opportunities for the EU countries and chart out a comprehensive strategy. There are
warning against cryptocurrencies and their instability by the European supervisory authorities
for security, banking and pensions; alongside in EU, the states react to the problems according
to their own needs and requirements (Suciu et al., 2019).

3.8 Cryptocurrencies in Germany, the United Kingdom and Switzerland

The Government of the UK found in 2018 that crypto assets can impact the market
significantly and provide real benefits to the financial services, though it was not mature
enough to depict its real benefits. However, after that, the scenario has changes and stable
coins are getting popular to store money and purchase. Alongside benefits, this system can
prober detrimental to the existing financial system. The UK is trying to maintain its position of Anti-money
the world leader in financial technology and develop regulatory mechanisms (HM Treasury, laundering
2021).
The UK has implemented few provisions to bring transparency in cryptocurrencies and
regimes
minimize the threats associated with digital currency. Some of these are communication of
minimum policy expectations, report on regulations, license by the Financial policy
committee and the status of the digital assets (HM Treasury, 2021).
Switzerland is already a tax friendly country and has transformed itself into Crypto 663
Valley since 2013, contrary to its neighbors seeking to restrict the ICO’s principally used to
develop businesses (Caytas, 2018). It has broken the traditional capital funding with smart
money and crowd support. The largest ICOs of the world have chosen Switzerland as their
base in 2017 when the cryptocurrency boomed (Zellweger-Gutknecht and Seiler, 2020;
Caytas, 2018). It has a goal of becoming a crypto nation in 5–10 years. The canton of Zug
was the first institution worldwide to accept Bitcoin as the payment method in 2016, as then
350 blockchain companies have been attracted to the country and it became the second
country after the USA to generate digital currency and funds. The cryptocurrency Ethereum
was also founded in Switzerland which is among the largest cryptocurrencies in the world
after Bitcoin (Kondova, 2018). Hence, Switzerland is the friendliest country toward
cryptocurrencies and operating here is legal if complied with the AML laws and regulations
about cryptocurrency (Zellweger-Gutknecht and Seiler, 2020). There is no problem in using
digital currency for business and blockchain technology is revered and there is an urge to
use this technology for innovations. There is a requirement of obtaining licenses for doing
business, for instance, an exchange license, a Fintech license or a banking license
(Cryptocurrency license in Switzerland).
The German population is well versed about cryptocurrencies with an average of 87%
people knew about it and 18% of the adults indulged in cryptocurrency exchange and
Bitcoin is the most popular form of cryptocurrency in Germany. The maximum users of
cryptocurrency are ideologically motivated and better educated than the non-users
(Blockchain Research Lab, 2019). The virtual currency legislation is present in Germany
which states that any person conducting virtual business needs authorization by the
German Federal Financial Supervisory Agency. Digital currency is included in the definition
of units of accounts of the financial services and Bitcoin is particularly part of it. If the
customers are given service, it is imperative to obtain a license in Germany. The commercial
platforms of digital currencies require a license from the authorities (Boehm and Pesch,
2015).

3.9 Anti-money laundering regimes

3.9.1 The United Kingdom anti-money laundering regime. The proceeds of Crime Act PoCA
2002 and the Money Laundering Regulations MLRs 2003 are the legal bases of the AML
regime of the UK (Preller, 2008). The PoCA established criminal law with regard to money
laundering. In Section 340(11)(a), money laundering is set to be the concealing of criminal
property (under Section 327) and entering into agreements to illegally transfer money (under
Section 328) and acquisition, use and possession of such property (under Article 329). The
undertaking, scheming or provocation of committing offenses under Articles 327, 328 and
329 are under the money laundering definition. Under Section 340(11) the money laundering
includes facilitating, counseling, procuring and assisting such offenses, nevertheless, there
are some provisions of these offenses and the defenses to these principal offenses under
these sections. In case of being found guilty, there is a prison of 14 years along with a fine
under the PoCA. These are serious crimes under UK law.
JMLC The regulated sector comes under scrutiny if fails to report any suspicious activity or
25,3 money laundering activity. The personnel of the regulated sector, as well as the unregulated
sector, are liable to come under scrutiny in case of evident silence on the illicit exchange of
money and the knowledge of the whereabouts of the money launderer under the PoCA 2002
Section 330. This offense is also punishable for five years of the sentence and a fine under
Section 334. Hence, the regulation of money laundering is not only the scrutiny of offenders
664 but also the facilitators or the ones knowing about the offense, hiding it or neglecting it.
Along with the whereabouts of the money launderer, it also includes the details of the
counterparty and the subjects (person companies and their addresses). The reporting system
is effective in extending the duties of the business quarter. According to money laundering
regime 2003, Section 7 the principle of KYC is important to maintain the record of customers
and training the staff and failure of implementing it would result in the criminal conviction
and two years sentence and fine under Section 3 2(a). The act of disclosure which hinders the
money-laundering investigation is also an offense under the PoCA Section 333, commonly
attributed to tipping off. If there is a lack of defense against tipping off, there is a sentence of
five years and a fine imposed under Sections 330, 331 and 332.
The criminalizing of the offense of hiding or concealing money laundering or any other
suspicious activity the UK has built a system of reporting of criminality, resulting in the
magnitude of SARs. In the next stage of collation, SOCA plays an important role, the
institution which has replaced the National Criminal Intelligence Service in April 2006.
SOCA possesses the responsibility of the AML regime’s financial intelligence FIU and its
database of serious activity reports (SARs) (Preller, 2008). Hence, FIU is the agency that
polices do not administer. The SOCA coordinates collect collates and analyzes the
information received. SOCA is not the only agency controlling the AML regimes but other
LEAs possess the same powers. SOCA is more of analyzing and informing while other
LEAs are leading the operational tasks after the investigations. The five basic needs of
investigation of AML, namely, search and seizure warrants, production orders, disclosure
orders (only recovering civil money and not the ML), customer information orders, account
monitoring orders are available to the customs officers, police officers and the asset recovery
agency. These powers are under special circumstances, to receive them to investigate the
matter. Therefore, in the UK the institutions are granted ample powers to investigate money
laundering offenses and detect them (Preller, 2008).
Due to the limitations and instability of the cryptocurrencies, it is not equivalent in the
UK. Recently the Bank of England is assessing the potentials of the blockchain and
cryptocurrencies and creation of the centralized system of issuance of digital currency.
Cryptocurrencies are not regulated but depend on the type of business, of which some are
under the regulations of the financial conduct authority (FCA). Regarding sales the crypto
assets task force accepts three kinds of tokens; exchange tokens such as Bitcoin and
Litecoin, security tokens which are under the scrutiny of the Financial Services and Markets
Act (2000). The money laundering regime of the UK does not allow carelessness in the
enforcement of KYC systems. The UK is implementing its 5th AML directive according to
EU law. Cryptocurrencies are promoted through different programs. The FCA’s (2019)
Regulatory Sandbox presents number of companies the opportunity to test their product
offerings in a secure environment. Furthermore, the formation of a Taskforce that deals with
crypto-assets and their constructive approaches toward this industry has increased belief
from both entrepreneurs and investors.
3.9.2 Anti-money laundering law of Switzerland. The criminal code of 1937, the
Ordinance of Money Laundering Reporting Office 2004 and the Money Laundering act 1997
are used to derive the AML legislation in Switzerland. The Criminal Code of 1937 Article 305
establishes that money laundering is an offense or act by which the establishment of law is Anti-money
disturbed. In other words, the establishment of law is hindered by such an act (Preller, 2008). Thus, laundering
any person with alleged knowledge of the crime of suspicion of a crime is under scrutiny. The
Swiss Money laundering if compared with the UK suggests that the Swiss laws are clear than the
regimes
UK PoCA. The PoCA criminalizes three basics offenses while Swiss law is narrow scoped,
nevertheless, the Swiss Law also punishes the perpetrator of money laundering crime regardless of
the fact that he/she has committed any predicate offense. If the offense is committed outside the
country it is punishable in the same way if the country of origin has the same laws for the 665
punishment of the offense under Article 305, similar to that of the UK. Small amounts of money
laundering are not an offense in the UK due to the negativity associated with the money
laundering approach and the evidence process from the regulated sector in the offenses (Preller,
2008). There is a stark difference in the punishments of UK and Swiss AML. Swiss CC has mild
sentences for offenses of about 3 years of prison along with the imposition of fines under Article
305. Under serious circumstances, the prison can extend up to five years. Hence, despite the fact
that they are located in Europe both have significant differences in the punishments of these
criminal offenses.
Regarding the reporting stage of money laundering in Switzerland, it does not punish the ones
who didn’t report but the ones who could not identify their customers. The financial legislation
sector has a responsibility to identify the one who has to be worked with in a detailed manner, to
avoid action. In case of the unidentified criminal background of the financial authorities, there is a
sentence of one year along with a fine. The financial intermediaries have the authority to present
a report of suspicious customer assets, without surpassing the secrecy rules of Swiss banks.
Under Swiss law, it is not mandatory to make reports of criminals. To clearly understand the
phenomena, the identification procedures are explained. The MLA was established in 1997
specifying important provisions of the obligations of the business sector and it clearly identifies
the sanctions in case of non-compliance. In Article 3–8 of the MLA, the regulations about KYC are
specified. Article 9 explains the reporting of the financial intermediaries about the offense or
suspicious person having any kinds of link with the crime or offense under the Article 305, such
kind of suspicion has to be reported to the Money Laundering Reporting Office Switzerland
MROS reporting under Article 9 instantly freezes the accounts of the perpetrator for five days
until the decision is made through the MROS who decides the fate of the reported one.
The failure of reporting the offense is not an offense until deliberately done so to conceal
or help the criminal. This law gives rights to the controlling agencies and every financial
sector works under one of these agencies. MROS works significantly to receive suspicious
reports and act on them. It is an administrative agency rather than a policing agency, in
contrast with SOCA. Its main function is the filtering of financial intermediaries and law
enforcement agencies. Under the MLA the MROS is responsible for the analysis of SARs
and take further steps. It is also responsible to report money laundering and manage a
database of information regarding such activities.
The MLO can be studied by categorizing its function, for instance, the compiling of
annual reports, assisting the authorities is the tasks of the MROS. They also analyze SARs
and taken decisions of informing the regional or national concerned authorities. Article 2–11
explains the system of dispensation of SARs. Article 3 is about the information of the
beneficiaries and the owners needed to be included in the SARs. The information has to be in
the reasonable database, GEWA. Contrary to UK law, there is a detailed account of the
procedure of reporting and how to add value to the SARs. The MROS can inform the
financial intermediaries about the progress of SAR. The Swiss laws are comprehensive and
devise procedures of the collation stage, although the inquiry stage is not well documented.
There is a lack of standardized laws in Switzerland regarding money laundering
JMLC investigations. The police can open investigations regardless of the reporting or not, on the
25,3 grounds of suspicious financial activity or allegation of offense. It can conduct individual
investigations on the authorization of the Attorney General of Switzerland. There is no
standardized legislation in Switzerland for investigative power while the UK AML law gives
particular rights to the investigators.
Switzerland has a special positive attitude toward cryptocurrencies and blockchain
666 technology (Kondova, 2018). The Swiss Financial Market Supervisory Authority accepts
that blockchain technology possesses the massive potential for the financial sector. Crypto
Valley in the Zug area is one of the largest hubs of cryptocurrencies and Fintech start-ups.
Until 2017 the “canton of Zug” accepted Bitcoin and other cryptocurrencies as initial shares
of a startup of a company (Caytas, 2018). There are no particular regulations for ICOs in
Switzerland (Suciu et al., 2019). The shareholders are expected to accept and obey the
existing laws and regulations of the banking, security and AML. Cryptocurrencies are like
assets rather than money, despite the fact that they are used frequently. Three types of
tokens are identified, for instance, the security tokens, but the ICOs are not identified to be
the tokens, if it is a token, it needs to have a license.
There are particular regulations regarding taxation. The principle tax is the wealth tax
and cryptocurrencies are converted in Swiss francs and the conversion rate is provided by
the Federal tax administration for the most used cryptocurrencies (Bitcoin, Ethereum,
Ripple, Bitcoin Cash or Litecoin). Gains from the cryptocurrency are exempt from the income
tax varying from 12.32% in Lucerne to 24.16% in Geneva for 2018 (Caytas, 2018). The
crypto businesses are liable to the AML regulations and thoroughness is required by the
financial institutions. The ICOs are also liable to the same procedure also including KYC.
There are no significant projects of the government or sponsored by the government in the
cryptocurrency sector. There are efforts of allowing the companies to accept the deposits
from the public without the bank license requirements to a certain amount. There was a task
force to establish “sandboxes” for the blockchain projects (Suciu et al., 2019).
3.9.3 The German anti-money laundering legislation. In Germany, money laundering at
the national level is persecuted at the regional level by the state office of criminal
investigations and local police. In the March of 2021, new MLR came into force, expanding
the criminal liability of money laundering. The criminal Money Laundering Code Section
261 of the German Criminal code devises the following:
 Money or other assets are the starting of an offense;
 The proceeds were intentionally hidden, masqueraded, procured and used; and
 The offender knowingly neglected the criminal proceeds.

After this regulation, now all kinds of offenses are predicate offenses and liable for scrutiny.
There are some conditions which decide that whether the crime is liable for scrutiny or not,
which ensures that the crime is committed in Germany under Section 2, No 9 StGB or any
kind of transport item of Germany holding its flag as follows:
 If the victim of money laundering is a German citizen and the crime is committed
outside Germany (Section 7, No 1 StGB) and the respective state follows the same
laws as that of Germany.
 The offender is German.
 The offender is captured in Germany and cannot be extradited (Section 7, StGB).
 If the crime is internationally a crime.
These laws apply only to the natural persons of Germany, but in Switzerland, natural Anti-money
persons and companies are liable to be prosecuted (The crime of money laundering and laundering
criminal enforcement). The legal and administrative authorities to watch over the money
regimes
laundering are lawyers, notaries, auditors, banks and financial institutions and the gaming
zones, casinos and other commercial places and these are regulated by the local self
regulatory bodies that impose binding money laundering obligations.
The German Criminal Code (StGB, 1971), the Code of Criminal Procedures (StPO, 1950)
the money laundering law (GwG, 1993) and the supplementary legislation (Banking Act/
667
KWG, 1961), is the basis of the AML legislation. The offense of money laundering in the law
is the hiding of the origin of the assets derived from a criminal source or hindering the
investigations of the offense in the form or preventing or threatening it (Preller, 2008).
German law restricts the predicate offense of money laundering listed in Article 261 of StGB.
German law also punishes the possession or use of illegally obtained assets under Section
361 (2) StGB. The offense committed in another country is punished in the same way if that
country possesses the same laws as that of Germany and this is similar to that of the UK and
the Switzerland AML laws.
The assets are confiscated under the law in a similar manner as the PoCA and the right
of defense is offered to the offenders. The fact that the associated predicate offense is not
punished in the German law under Section 261 distinguishes German law from the UK and
Switzerland. There is a significant difference in the prison period for money laundering in
Germany and the UK as German law varies the sentence from three months to five years
depending on the gravity of the offense. Extension of the prison is possible in German law,
resembling the Switzerland law. Contrary to Swiss and UK laws, German law punishes the
negligence of the crime or an offense to two years of the sentence and fine imposed.
Regarding money laundering laws, Germany can be considered in between the UK and
Switzerland. The German and Swiss laws are akin to each other in punishing the
perpetrators while the UK and German laws are the same in offering defense to the
perpetrators and a chance of proving innocent.
In German law, the GwG obliges the financial intermediaries to identify their customers
in case of long relationships and business. Businesses with huge amounts of exchange and
deals are more prone to identify customers. The identification requires a lot of information
about the customer including name, date of birth and place of birth, nationality and address
of such person. This information is needed to be recorded for at least six years which is only
available for prosecution purposes. Along with the duty to identify the reporting of the
financial transactions is an important part. In case of suspicion, the regulated businesses
might inform the authorities’ bases in the German Federal Police Agency (BKA). Similar to
the UK and Switzerland the contents of the SARs are only accessed by the prosecuting
authorities, tax and supervisory authorities. The law also prohibits violation of the secrecy
rules and the negligence of the money laundering activity. The businesses are obliged to
maintain the internal security measures such as compliance officers, security and control
system are managed, as well as the employees hired are checked thoroughly and trained
with time. Not keeping the record for six years is also an offense along with failing to
identify the customer. This could lead to heavy fines of up to e100,000. Less serious offense
requires 500,000 of fine. Many breaches are not punished under German law like failing to
report or to delay the suspicious transaction.
Hence, if we compare Switzerland and Germany value identification is more than
reporting while in the UK reporting is more important. Contrary to the Swiss and the UK the
prosecuting officer does not act as an intermediary in German law. The German FIU is also
JMLC policing agency like that of the UK, but contrary to Swiss law. This helps to integrate
25,3 intelligence sharing among the prosecuting authority.
The reporting officer is also liable of sending information abruptly to the prosecuting
authorities. The reporting office is responsible to identify new suspects. The FIU has the
duty of report compilation, data interpretation and updating staff about new progressions in
money laundering and its typologies. The databases used by the reporting officers and the
668 prosecuting authorities are not similarly making it difficult to create a comprehensive record
of the data obtained and preserved. In case of any offenders caught, the disclosers are
informed about the details if any of the transactions are delayed. For effective coordination
between the investigators and the reporters, the prosecutor office sees over everything. The
prosecutor has the duty of informing the reporting officer about the outcome of the
prosecution.
The competences of the prosecutors are the searching, seizing, interception of phone
calls, photographing, placing bugs, customer information access from the telecommunication
sector, location search and undercover operations. Contrary to Swiss law, Germany has a
standard approach. However, the UK has the most competent and specific powers granted to
the prosecutors (Preller, 2008).
3.9.4 A comparison. The UK regime has a detailed framework of the AML regime, as it
faces a number of SARs annually. For instance, it received 30,000 to 195,000 SARs in four years
from 2001/2005 (Preller, 2008). The reason for the increase is the result of reliance more on
quantity than on quality. To avoid criminal prosecution the people report the suspicious
activity. The UK has the highest costs of SARs around 255£per annum. This equates to 0.26%
of the total GDP of the UK. It is incomprehensible that the AML regime of the UK works up to
the mark as it has higher costs and comparatively lower recovery rate and it is also doubtful
whether the LEAs can cope with the SARs in an efficient manner and due time.
The case of Switzerland is different in that the numbers of SARs received to MROS are quite
low due to the mild laws of reporting a criminal offense not binding by the law and the AML is
narrow in scope, but high in quality depicted by the number of convictions. Hence, the UK and
Germany receive more SARs than Switzerland. Germany also does not oblige the reporting of
the offense and there is no such punishment as in the UK. The primary offenses of the criminals
are not punishable under German law due to the fact that it does not lead itself to the
prosecution of the assets of criminals which became the base of the criminals. There was no
such data which could be used to draw concrete conclusions about the efficacy of the AML
regimes due to limited data available.
Thus, the three countries have different AML laws in the scope of the legislation, sentences
against Money laundering, the duties of the regulated sector, the role of the FIU and the power
of investigations. There are also differences in the cases received to the prosecutors. The most
obvious differences were between the UK and Switzerland, where the UK has a more
traditional and radical approach while Germany can be placed between the two countries due
to its similarities to both countries in their AML laws.
There is money laundering of £100bn per annum. About 1% of activities of money
laundering are caught, and thus the legislators and authorities have increased measures to help
eradicate money laundering. This has resulted in increased reports of suspicious activities
reported by the German banks, this increase can be said to be manifold. In February 2021, the
German Bundestag has tightened the money laundering criminal law. The EU directive of the
(2018/1673), the sixth directive of money laundering is the backdrop of the reform.
This reform was to align the German law with the EU law as there were many provisions like
predicate offense not part of money laundering were not complying with the EU law. For example,
the theft insider trading or fraud was covered by the AML law if it was a commercial activity or an
organized group of offenders. Although the reform is a more stringent measure than the directive Anti-money
and is seen by the professionals as controversial, some of them consider it necessary to combat laundering
money laundering. Three areas are illustrated to distinguish between the approaches adopted by regimes
Germany in the aftermath of the new law adopted by Germany. The crimes of any sort would be
now liable to be investigated and the case that only serious predicate offenses can be punished is no
more relevant. The legislator will follow the all-crimes approach to address money laundering in
Germany. This all-crimes approach is also practiced in the UK, which is heavily critiqued by the 669
literature of AML. This can also lead to an added burden on the judiciary as there were extensive
cases to be judged. Alongside, police and judiciary have welcomed the new laws.
The confiscation of assets as is the case in the UK and Switzerland is upon suspicion of
money laundering. The catalogue offense if suspected will lead to the confiscation of the
assets. The provision of convicting the criminal in the foreign lands if the laws of both
countries are the same is no longer apply directly,
The reform will lead to an increase in the cases and there would not be possible to
prosecute them.

4. Conclusion
There is a need of understanding of the global structure and atmosphere for the start-up of a
business, rather than the absence of regulations and legislations for blockchain and
cryptocurrency businesses. Despite being the leader in blockchain strategies, fewer countries
are among the ones benefitting from it. The UK, Switzerland and Germany are the friendlier
countries benefitting from the digital businesses. Starting a business in these three countries is
not an easier task as there is a procedure to get started and hire lawyers and license, etc., but it
is legit so investors are more interested to invest in it (Suciu et al., 2019).
The principle issues to be addressed in the money laundering and tax evasion through the
cryptocurrencies are the anonymity around the transactions and decentralization and the EU laws
are failing to cope with the issues with this currency. However, the fifth directive of the EU law is
concerned about digital currencies and has provisions about the definitions of virtual currencies.

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Corresponding author
Christoph Wronka can be contacted at: [email protected]

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