Home / Coin Payment / The role of the Financial Action Task Force

The role of the Financial Action Task Force

Uncertainty is the enemy of all business. And unfortunately for many blockchain companies, they were on ropes to walk through a huge void when it came to regulating cryptocurrency. But what is the role of the Financial Action Task Force (FATF) when it comes to this murky area?

The Financial Action Group (FATF)

The FATF is an international organization based in Paris. It was established in 1989 by the G7 with a high goal: to set the standard for financial institutions when it comes to combating money laundering.

As we have seen from repeated cases of infringement in this area by entities like German bank, regulations are not always heard However, the FATF anti-money laundering guidelines are still the recognized international standard.

What about the FATF regulation and cryptocurrency?

What does the FATF have to do with the regulation of cryptocurrency? Well, just like financial services, the entity is currently preparing an international framework for AML policies. They will apply to cryptocurrency exchanges, custodians and portfolio suppliers.

In 2015 (a long time ago, when it comes to cryptocurrency), the FATF introduced a guide on how to deal with digital currencies and invited participating countries around the world to take coordinated actions.

However, driving was at its best, and their recommendations are currently unable to establish a universal standard.

Without clear regulation by the corresponding entities in their operational jurisdictions, many cryptographic companies have started implementing their own versions of KYC / AML. Many of these require little more than a national ID and a verified e-mail.

In October 2018, the FATF has established that their recommendations needed revision. Both companies and governments were clamoring for how to implement what they were asking for, rather than creating their crafted version. The new guidelines will come into force in the third quarter of 2019.

What do the new rules mean?

According to FATF reviews, each jurisdiction (currently composed of 37 countries) must ensure that virtual goods service providers such as custodians, payment service providers, exchanges and any financial services provider for ICOs (which are few and far apart) ) are all subject to the AML and CFT regulations (against terrorist financing).

For the regulation of cryptocurrency, this means that companies will need more stringent processes in customer onboarding. They must register with the corresponding national body and have themselves checked during the reporting of suspicious transactions.

It should be noted that the objectives of the FATF, according to the entity itself, are not to crush innovation in space. According to them October declaration:

"In the context of a step-by-step approach, the FATF will prepare updated guidelines on a risk-based approach to regulate virtual goods service providers, including their oversight and monitoring, and guidance for operational and law enforcement authorities. 39; identification and investigation of illicit activities involving virtual goods ".

The need for regulatory clarity

Many people in space claim that cryptocurrency regulation will only hinder or limit innovation. However, most legitimate blockchain companies want regulatory clarity to grow their businesses.

When a CEO is not sure if the technology, product or operation will become illegal from one day to the next, it is quite difficult to plan their next move or win investors.

FATF President Marshall Billingslea admitted in October that the current AML standards for cryptocurrencies were:

"Creation of significant vulnerabilities for national and international financial systems."

What about the Financial Action Task Force (FATF) in the United Kingdom?

Last month, the FATF put pressure on the United Kingdom to intensify cryptocurrency monitoring. According to a relationship since 7 December, the United Kingdom needed stricter measures to prevent money laundering and fight terrorist financing (CFT). In fact, the organization has declared that the country has requested a "significant revision".

The FATF has stated that many sectors of the British economy have failed to understand the risks of a lack of regulation of cryptocurrency or clear AML / CTF standards. They also demonstrated a lack of knowledge on how to effectively mitigate these risks.

"Virtual currency exchange providers are not yet covered by the AML / CFT requirements … This is an emerging risk and there is still no evidence to suggest that a large-scale ML / TF will take place in the UK through this sector. relatively small ".

The FATF has urged the United Kingdom to take further action against cryptocurrency trade suppliers.

The takeaway

Around the world, the cryptocurrency regulation is stepping up. From countries that are developing new laws like Malta to the FATF that create international standards for AML / CTF, regulatory clarity is starting to take shape.

Source link