Category Archives: Financial Action Task Force

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FATF to Enforce Time Restriction on Exchanges’ Customer Information

FATF To Enforce Time Restriction on Exchanges' Customer Information

The Financial Action Task Force (FATF), who met last week for another round of talks to decide on new AML steps, is to bring in a time restriction for crypto exchanges on data sharing.

The FATF has set a time limit of 12 months during which time exchanges must share user and sender information with “beneficiary institutions”.

The new data sharing guidelines, which are not actually set in law as yet, have further angered those in the industry who already feel that the rights and anonymity of both crypto senders and recipients are being eradicated by over-regulation. crypto exchanges Countries that do not comply with the FATF’s latest rules could face being blacklisted. Exchanges under the ATM guidelines must now:

“… obtain and hold required and accurate originator [sender] information and required beneficiary [recipient] information and submit the information to beneficiary institutions … if any. Further, countries should ensure that beneficiary institutions … obtain and hold required (not necessarily accurate) originator information and required and accurate beneficiary information …”

As one London-based digital finance group explained in a letter to the FATF most codes sent along with transactions already contains much of the information that the new rules require despite the fact that cryptocurrency transactions were originally intended to carry a high degree of anonymity for all participants.

This was pointed out to FATF by another company Chainalysis earlier this year who commented that “Virtual Assets are designed to provide a way to move value without the need to identify the participants in a transaction”. The fear is now that this requirement may drive some exchanges and wallet provider to the wall if it is enforced, a point clearly of little concern to U.S. Secretary of the Treasury Steven Mnuchin who commented:

“By adopting the standards and guidelines agreed to this week, the FATF will make sure that virtual asset service providers do not operate in the dark shadows.”

 

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Virtual Asset Summit Gains Global Legislator Support

Virtual Asset Summit Gains Global Legislator Support

CoinTelegraph Japan reports that virtual asset service providers (VASP) will be providing a formal response towards a set of recommendations for virtual currencies set forward by the Financial Action Task Force (FATF).

This response will be in the shape of a so-called V20 summit, which they hope to convene alongside the G20 Leaders Summit in Osaka, Japan on 28 and 29 June 2019. It is said that global legislators have expressed their firm backing for this summit, which will bring together economic leaders of the G20 nations along with their national blockchain associations, VASPs, and legislators from various jurisdictions.

All this because of the growing discussions around the series of recommendations developed by the FATF — the body established between the governments of the G7 group of economies that seek to promote common standards in legal, regulatory and operational actions against money laundering.

Their guidelines are thought of as a global benchmark in anti-money laundering efforts and the fight against illegal financing. They are used by some 200 countries despite not being legally binding, and now countries hope to adopt the same guidelines as they come face-to-face with crypto.

As it stands, however, not everyone is on the same page as to the current recommendations on virtual currency, with former FATF President, Roger Wilkins AO and former secretary Australian Department of the Attorney General, stating that:

“What we are hearing from industry is that the new rules may have the opposite effect to which they were intended, effectively forcing crypto transactions off the controlled platforms, which are currently one of the best avenues we have in gaining visibility over financial crime.”

The warning that overly restrictive regulations would drive crypto underground is not without basis — Iran and Venezuela are two recent examples where citizens continue to use Bitcoin peer-to-peer when their respective governments sought to ban them.

The G20 finance leaders and their central bank counterparts have already asked the Financial Stability Board (FSB) and global standards organizations to consider a multilateral crypto response.

 

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Financial Action Task Force’s Next Step Towards Crypto Regulation Due 21st June

Financial Action Task Force Next Step Towards Crypto Regulation Due 21st June

Some further clarity for regulation in the cryptocurrency could be the result of the Financial Action Task Force’s (FATF) next publication scheduled for 21 June.

The regulations, targeting cryptocurrency exchanges, custodians, wallets and cryptocurrency-related businesses, are continually being monitored by the FATF, but this next publication has some virtual asset service providers wondering what to expect.

The objectives of the inter-governmental FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. Such is the nature of the debate surrounding whether cryptocurrency should or should not be allowed to become embedded in the global financial environment, many task forces are currently examining where to go next when it comes to regulation.

Recently the Swiss-based FSB’s “Crypto-assets work underway, regulatory approaches and potential gaps report,” urged the G20 to keep the question of more coordination between international financial standard setters under review. The issue which most other groups tasked with cryptocurrency regulation are coming across is that members hold quite different views about how to move forward with cryptocurrency regulation.

One industry leader, exchange giant Coinbase, is keen to see the outcome of the 21 June announcement. Coinbase chief compliance officer Jeff Horowitz is hoping for a measured approach as he feels that heavy-handedness by the FATF may be a counterproductive measure. He argues:

“Applying bank regulations to this industry could drive more people to conduct person-to-person transactions, which would result in less transparency for law enforcement,” adding “The FATF really needs to consider the many unintended consequences of applying this specific rule to VASPs.”

Coinbase will not be alone in awaiting to examine what the next step in the regulatory process offers the industry on June 21.

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Crypto Exchanges Hold Breath as FATF Closes In on Recommended Policy Standards

Crypto Exchanges Hold Breath as FATF Closes In on Recommended Policy Standards

As the battle for acceptance into mainstream economics rage on, the cryptocurrency ecosystem continues to face daunting regulatory challenges. And as far as financial regulatory policies go, one perceived to likely have a far-reaching effect on the development of the cryptocurrency industry may soon set in, as the 21 June deadline approaches for the implementation of the Financial Action Task Force’s (FATF) Interpretive Notes as part of its virtual currency standards.

A recent report from Bloomberg indicates that the move by FATF in its Interpretive Notes – designed to clarify how virtual assets are to be regulated, may yet be the greatest fear for the industry.

“Their recommendation could have a much larger impact than the SEC or any other regulator has had to date”, says Eric Turner, director of research at crypto researcher Messari Inc. Although Turner thinks much of the rules will be subject to the interpretation of the individual jurisdictional regulators, he was of the opinion that the recommendation remains “one of the biggest threats to crypto today”.

The report further reflects on the FATF guidelines which advocates for a thorough know your customer (KYC) and anti-money laundering (AML) approach to be adopted by countries; noting that it may, however, be expensive to implement given that a good number of cryptocurrency wallets are designed for anonymity. For the recommendations, it may require “a complete and fundamental restructuring of blockchain technology,” suggests John Roth, Bittrex’s chief compliance and ethics officer, emphasizing on the cost-impact on compliance.

The FATF, as a multi-government initiative whose sole objective to provide standards that promote the necessary policy measures against money laundering and terrorist financing, could pose a serious challenge to the freedom of use of cryptocurrency. Such that, its recommendations to member countries to “apply a risk-based approach”, will undoubtedly have a blanket effect in over 200 countries, should it be adopted. This, perhaps, will invariably apply undue pressure on cryptocurrency exchanges and custodians to release sensitive data of their users, which, in turn, may drive wary customers to other means of transacting their cryptocurrencies.

Recently, the Japanese regulator stepped up its anti-money laundering campaign against non-compliant cryptocurrency exchanges in a bid not to fall short of the expectations of the FATF, after having received a lowest possible ranking back in 2018. This goes on to show the importance and steep ramifications of the FATF’s recommendations.

 

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Japan Regulator to Inspect Crypto Exchanges for AML Policies Ahead of FATF Inspection

Japan Regulator to Inspect Cryptocurrency Exchanges for AML Policies Ahead of FATF Inspection

The financial services agency (FSA) is reportedly stepping up its anti-money laundering campaign against non-compliant cryptocurrency exchanges, reports Nikkei Asian Review.

According to the report, “Japan’s anti-money laundering regime is expected to undergo an inspection by an intergovernmental body [financial action task force (FATF)] this fall, and the FSA is eager for a good review”. To this end, in order not to fall short of expectations, as it is also expected to chair this year’s G-20 meeting, it is tidying up its house to make up for any shortcomings that may exist:

“The FATF’s investigatory body will come to Japan this fall to assess domestic money laundering laws. It is expected to look at cryptocurrency exchange operators, banks and credit unions, according to a senior FSA official, so there is a pressing need to develop countermeasures.”

The forthcoming rating is important to the country as back in 2008 “the FATF gave Japan its lowest possible rating in regard to financial institutions identifying their clients,” this it did stating that Japan had an “insufficient legal framework.”

One of the major concerns of the FSA is the offering of anonymous services, and the agency intends to bring to cross-hairs all financial institutions to include crypto exchanges and banks involved in such transactions; in the bid to protect the financial security framework and also strengthen its AML policies by ensuring that cryptocurrency service providers, as well as financial institutions, are keeping up with the standard.

Japan is reportedly the first country to introduce a registration system for cryptocurrency exchanges in order to combat AML practices. Moreover, in April, the Japanese Prime Minister Shinzō Abe commissioned a cryptocurrency governance manual which is expected to be part of the agenda during the forthcoming G20 Summit, therefore, placing the country on a reputation scale in front of all members of the G-20.

The current move by the FSA is in concert with the recent unscheduled inspection carried out on two exchanges – Huobi Japan and Fisco Digital Asset Group – when it considered the administrative setup which it considered were insufficient to cater for the security of clients.

 

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35 Countries Advised to Review, Implement Banking-Like Regulations for Crypto

FATF

The FATF (Financial Action Task Force) in a recent assembly in France has called for tightening supervision over cryptocurrency exchanges in a way similar to commercial banks. The body advised all its 35 member countries to supervise the exchanges to prevent cryptocurrencies from being misused for unlawful transactions.

The new FATF guidelines are aimed at ensuring regulation and supervision of cryptocurrency service providers. The body has urged all its members to regulate cryptocurrency exchanges and associated transactions in the same way they regulate commercial banking institutions. The inter-governmental organization has made it obligatory for its member nations to adopt these changes, finalizing the necessary implementations for the supervision and regulation of virtual currency providers. These measures can be officially and formally adopted as a part of the FATF requisites from June.

To make effective use of the suggestions made by the FATF, member nations have to contemplate virtual assets and digital currency as “property”, “proceeds, “funds”, or other different “corresponding value”.

In addition, members will have to adopt relevant measures against virtual assets and their providers. They must now require virtual asset providers to realize and assess the potential terror financing and money laundering risks, and take effective actions to mitigate the same.

The FATF has established standards to promote effective implementation of the legal, regulatory and functioning measures for standing against money laundering, terrorist funding and other threats imposed on the integrity of the international finance system.

However, the taskforce has clarified that member nations need not establish a separate licensing or registration system for a person or persons who are already licensed and registered in this manner as financial institutions. These financial institutions already have obligations apart from the new suggestions, and hence they are permitted to accept crypto assets providers.

 

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Japan to Regulate Crypto Wallet Services

Japan’s Financial Services Agency (FSA) is planning to impose regulations on cryptocurrency wallet service providers, according to a published account of its latest meeting.

The agency gathered earlier this week for its ninth cryptocurrency study group meeting. The FSA also hosts regular study group meetings to discuss various crypto regulatory issues, particularly those concerning the regulation of cryptocurrency exchanges.

A major topic of its last meeting was a plan to regulate wallet service providers, given that currently, FSA regulations are not applicable to such services as such providers are not in the business of actually trading. The agency now feels that because such providers manage transfers and storage of digital currencies, they should be brought in line with financial regulation.

It was revealed that any new regulations would not apply to wallet software developers and hardware wallet manufacturers as these are often simply coded private facilities with no company backing.

The focus is again on money laundering and as such, Financial Action Task Force (FATF) regulations will become the basis for the new regulations according to the FSA. The FATF is an intergovernmental organization that designs and promotes policies and standards to combat financial crime. Recommendations created by the task force target money laundering, terrorist financing, and other threats to the global financial system.

Other issues discussed in this ninth meeting of the cryptocurrency study group around the topic of wallet services touched on stolen funds during cyber-attacks, wallet failures, money laundering, and other risks shared by crypto exchanges.

The FSA is continually updating its cryptocurrency regulations. At this last meeting, further measures to regulate the industry were discussed, such as financial audits and the separate management of funds belonging to service providers and customers. Also, it was suggested that during a transition period for introducing new wallet regulations service providers would not be able to add new businesses, customers, or coins supported by the wallet.

 

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Crypto Faces Global AML Regulations by June 2019, Says Watchdog

The international watchdog focused on anti-money laundering (AML) regulations has said it plans to institute a global framework for cryptocurrency beginning in June next year.

As Reuters reports, the Paris-based Financial Action Task Force (FATF) has taken a significant step forward in the process of regulating the famously unregulated market of digital currencies with its announcement this week.

FATF detailed plans to begin publishing rules that would set a standard for all cryptocurrency transactions, noting that global jurisdictions would be required to enforce certain licensing schemes or compliance checks on exchanges, financial service providers for initial coin offerings (ICO), and potentially digital currency wallet providers.

Marshall Billingslea, FATF’s president, was responsible for setting the early summer date for action next year following discussions this week between officials from 204 global jurisdictions.

The upcoming regulations come with a warning: any non-compliant countries will be put on FATF’s blacklist, meaning they will suffer from restricted access to the global financial system.

A statement released by the watchdog on Friday reads: “there is an urgent need for all countries to take coordinated action to prevent the use of virtual assets for crime and terrorism.”

A lack of global cooperation on cryptocurrency regulations until now has led to entirely different approaches being adopted by national governments, bringing uncertainty to crypto firms looking to expand their operations.

Countries have failed to agree on how best to manage the price volatility of the cryptocurrency market, and have been skeptical of wallets’ and exchanges’ inability to protect peoples’ investments on their platforms from hacks and ensuing theft.

During the G20 Summit earlier this year, leaders expressed a desire to expand existing international AML onto the cryptocurrency industry.

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Abu Dhabi Regulator Wants Internationally Standardized Crypto Regulation

Abu Dhabi’s head financial regulator has called for internationally standardized regulations for cryptocurrencies in order to prevent both criminal activities and their negative impacts on the image of virtual currencies.

Richard Teng, head of the Financial Services Regulatory Authority of the Abu Dhabi Global Market (ADGM) spoke at the country’s fintech event this week where he detailed the necessity for increased regulation of the space.

“This space needs to be properly regulated, otherwise there is the risk of financial crime… Every time a coin gets stolen or lost, it affects the confidence in this asset class,” Teng shared with the audience.

He continued, saying that he has full confidence in the country’s own ”comprehensive regime.” By sharing Abu Dhabi’s experience with global regulators including the US Securities and Exchange Commission, he hopes to bring a stronger trust in cryptocurrency to investors and governments alike.

International AML Laws Coming

Teng’s sentiment is popular among international regulatory leaders. On Wednesday, the Financial Action Task Force (FATF) announced that they are a step closer to establishing global anti-money laundering (AML) policies for cryptocurrencies, with a FATF plenary scheduled in October.

During this discussion period, the task force consisting of 35 member jurisdictions and 2 regional organizations hope to agree upon what existing standards need to be adjusted in relation to cryptocurrencies, and what action the states need to take to uphold this.

The agency’s president Marshall Billingslea echoed Teng’s opinions in saying that the standards need to be applied in an internationally standardized way. Billingslea described the current AML policies as ”very much a patchwork quilt or spotty process” which leaves major vulnerabilities in financial systems on an international and state scale.

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