Anti-Money-Laundering Watchdog Calls for Stronger Cryptocurrency Regulations

By Kristin Broughton 

The global standard setter for anti-money-laundering laws called on countries to apply more scrutiny to virtual currency firms that transfer customer funds.

The Paris-based Financial Action Task Force said Friday that countries should adopt regulations requiring virtual currency companies -- including exchanges and wallet providers -- to collect information about their customers and share it with other institutions, including other crypto firms, that receive fund transfers.

The FATF, established three decades ago by the Group of Seven leading nations, evaluates the policies countries have in place to combat money laundering and terrorist financing.

The updated guidance, published Friday following a meeting in Orlando, Fla., comes as financial regulators grapple with how to regulate virtual currency firms.

U.S. policy makers this week said they would scrutinize plans by Facebook Inc. to launch its own cryptocurrency, looking at issues including anti-money-laundering controls. In prepared remarks for an annual address to bankers in London's financial district, Bank of England Gov. Mark Carney also said Facebook's Libra project should be carefully vetted by regulators.

At the FATF meeting, U.S. Treasury Secretary Steven Mnuchin said the guidelines will provide more transparency to markets that have allowed financial criminals to transact anonymously.

"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," Mr. Mnuchin said, according to a copy of his prepared remarks.

In adopting what is known as the travel rule, the FATF will require virtual currency companies to identify senders and receivers involved in fund transfers, similar to the way banks provide each other with customer information for wire transfers. Additionally, the FATF guidance says countries should designate an authority responsible for licensing or registering virtual currency companies.

The FATF expects to incorporate the new guidance into its assessment methodology in October, and then will begin assessing countries' compliance, according to a spokesman.

Crypto companies across the globe may face hurdles in implementing the new standards, according to executives who advise the firms.

Among the challenges: Virtual currency companies currently don't have a secure way to share customer information with each other, similar to the way banks use the Swift interbank messaging network for wire transfers, said Alma Angotti, managing director with the global investigations and compliance practice at Navigant Consulting in London.

And while some crypto companies have invested heavily in compliance, others have a long way to go to build the systems necessary for collecting and managing customer information, said Michael Nonaka, co-chair of the financial services group at Covington & Burling LLP.

"We don't know right now the extent to which the new rule will pose difficulties," Mr. Nonaka said.

Write to Kristin Broughton at [e-mail]

(END) Dow Jones Newswires

June 21, 2019 18:38 ET (22:38 GMT)

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