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The Financial Action Task Force [FATF], an inter-governmental body that includes the most influential countries in the world such as the United States, Russia, China, United Kingdom, and Germany, has taken the first step towards providing better regulatory clarity that was much sought after by several businesses in the cryptocurrency space. However, the guidelines set up by the commission that was created for tackling money laundering and terrorist financing could create more problems than good to these firms, particularly exchanges and custodial service providers.
One of the main challenges crypto-service providers will face will be with regard to data collection as they will be required to not only “identify” people who will be transferring funds but to whom it is being transferred to, forcing them to throw away one of the key principles of cryptocurrencies. The ruling that applies to any transaction worth over $1000 will see several service providers, no matter how big or small, introducing stringent KYC/ AML procedures. Additionally, these guidelines will be imposed on all the member countries, with the risk of not following being a potential blacklist.
The new guidelines was one of the important topics that were discussed at The FATF week. The event was a six-day meet held in Orlando, Florida, which had representatives from 205 members of FATF global network, including the World Bank and the United Nations. U.S Secretary of the Treasury, Steven T. Mnuchin, addressed this topic at the closing remarks today. The Secretary explicitly stated that all the cryptocurrency service providers will have to follow the same Anti-Money Laundering/ Combating Financing of Terrorism [CFT] procedures that has been set-up for other financial institutions in the United States.
The Secretary stated,
“For example, service providers must register with FinCEN. They must also institute an AML program, and recordkeeping and reporting measures, including filing suspicious activity reports.”
Source: U.S Department of Treasury
The new guidelines outlined by FATF restates that firms involved in providing cryptocurrency services will have to start collecting information about the person who’s transferring funds and to whom it’s being transferred to. Along with this, they will also be required to “develop processes” that will enable them to share the same information to other service providers and regulatory authorities. Service providers will also be required to ensure that its customers are not involved in any illegal activity.
Secretary Mnuchin further stated,
“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. This will enable the emerging FinTech sector to stay one-step ahead of rogue regimes and sympathizers of illicit causes searching for avenues to raise and transfer funds without detection. “