The End of Confidentiality for Crypto-Currency Owners?

The FATF (Financial Action Task Force) will not allow Cryptos to replace Numbered Accounts.

In June 2019, the latest plenary session of FATF concluded with a note concerning virtual assets and their service providers. This legally binding note requires international action, and that countries:

• Begin the licensing and/or registration of such virtual assets and providers
• Subject such assets and providers to identification measures
• Subject such assets to due diligence
• Appoint regulatory bodies for their proper supervision and monitoring

FATF Recommendation 15 Comes Into Effect

The guidance was a concluding note following a plenary session where Recommendation 15: New Technologies saw some revision. Recommendation 15 is a response in identifying the use of new technology by money launderers and terrorists in their activities.

The measure made virtual-asset service providers subject to identical FATF measures that have traditionally applied to other well-established financial institutions. Further, Recommendation 15 explicitly rules out industry self-regulation.

Impose Sanctions

Countries are now required to impose sanctions for non-compliance on virtual-asset service providers that fail to enact anti-money laundering procedures. They must enact all measures mentioned in the list above, but also record keeping, reporting, and report any and all suspicious activity. All transactions must be screened for compliance with measures in place to enact financial sanctions where necessary.

Such digital asset service providers are also required to identify the fund recipient and the sending agent, and have a framework in place for disclosure to relevant authorities, and to other digital asset providers.

FATF commented that their main concern was to crack down on criminal and terrorist activity using such digital assets.

The G20 Meeting Reception

The measures were welcomed by finance ministers and governors of the world’s Central Banks who called on FATF in 2018 to enact such measures. FATF now expects all countries to act on their recommendations. The first 12-month review will take place in June 2020.

Outgoing FATF President, Steven Mnuchin who is also US Secretary of the Treasury, said the robust measures would ensure “virtual asset service providers do not operate in the dark shadows.” With it, international efforts will enable the world of digital finance, and new technologies, to stay ahead of criminal activity and rogue regimes.

In conclusion, Mnuchin compared the issue with secreted numbered account and was determined to ensure that cryptocurrency was not used in the same way for illegal activity such as terrorism and money laundering.