FATF 'will not allow cryptocurrency to replace secret numbered accounts'

Countries are now required to license or register virtual-asset service providers, to subject them to customer identification and due-diligence rules, and to appoint official bodies to supervise or monitor them.

The guidance accompanies revisions to the FATF Recommendation 15: New Technologies, in response to the increasing use of virtual assets for money laundering and terrorist financing. It means that virtual-asset service providers will be subject to the same FATF measures that apply to financial institutions. Self-regulation, the approach provisionally adopted to date in many jurisdictions, is explicitly ruled out by the guidance.

Under the FATF standards, countries must impose sanctions on virtual-asset service providers that fail to comply with anti-money laundering measures. They must also implement the full range of preventive measures recommended by FATF, including customer due-diligence, record-keeping, suspicious transaction reporting, and screening all transactions for compliance with targeted financial sanctions.

Service providers will have to identify on whose behalf they are sending funds, the recipient of those funds, and set up processes for disclosing that information with other providers of virtual assets and law enforcement agencies.

'The threat of criminal and terrorist misuse of virtual assets is serious and urgent', commented FATF in its report. It expects all countries to take prompt action to implement the recommendations in the virtual-asset context, and will monitor implementation of the new requirements by countries and service providers in a 12-month review, scheduled for June 2020.

Finance ministers and Central Bank Governors at the G20 meeting in Japan welcomed the FATF's guidance, which they had themselves demanded last year.

US Secretary of the Treasury Steven Mnuchin, who is FATF's outgoing president, said the new FATF guidelines 'will make sure that virtual asset service providers do not operate in the dark shadows,' and will enable the emerging financial technology sector 'to stay one step ahead of rogue regimes and sympathisers of illicit causes searching for avenues to raise and transfer funds without detection'.

'We will not allow cryptocurrency to become the equivalent of secret numbered accounts, said Mnuchin. 'We will allow for proper use, but we will not tolerate the continued use for illicit activities....We must work together to ensure that virtual assets are no longer a safe haven for illicit actors to end-run around established [anti-money laundering] safeguards.'

Sources

• FATF
• Guidance (PDF)
• FATF (Public statement)
• US Department of the Treasury
• FinCEN