New FATF regulations: All cryptocurrency exchanges around the world need to share customer data

According to Coindesk's June 22 report, this Friday, the Financial Action Task Force identified its final recommendations for managing cryptocurrencies for its 37 member states.

The Financial Action Task Force (FATF) is an intergovernmental organization dedicated to combating money laundering and terrorist financing. Its management standards include a controversial request to include “including cryptocurrency trading”. Virtual Asset Service Providers (VASPs) need to transfer customer information to each other when transferring funds between companies.

Shutterstock_750217510-860x430 (Source: Coindesk )

In February of this year, the Financial Action Task Force published a controversial proposal, and the controversial content in this proposal officially appeared in the latest guidance, which states that countries should ensure that they are cryptocurrency companies. When remittance is made, it is possible to “acquire and hold the exact sender and receiver information and submit it to the receiving agency. In addition, countries should ensure that the receiving institution obtains and holds the required sender information and receives it. Party information."

Under the new regulations, the information required for each transfer will include:

  1. The name of the sender;
  2. The sender account used to process the transaction (eg VA wallet);
  3. The actual (geographic) address of the sender, or the national identity number, or the customer identification number, or the date and place of birth;
  4. The name of the beneficiary (recipient);
  5. The account that the beneficiary uses to process the transaction (such as a VA wallet).

The Financial Action Task Force stated in a public statement that “the crime of abusing virtual assets and the threat of terrorism” is a “serious and urgent” issue, and the organization will give countries a year to adopt these guidelines, and The implementation of these countries will be reviewed in June 2020.

This so-called travel rule is a requirement that international banks have long dealt with when remittances to customers. However, advocates in the blockchain industry believe that it will be very cumbersome or even impossible to apply this requirement to the field of cryptocurrencies, and this will only harm the privacy of users and even the purpose of law enforcement. reaction.

Enforcement recommendations mentioned in the guide

The guidelines issued by the Financial Action Task Force also suggest that individuals who use cryptocurrency to transfer value can be considered a virtual asset service provider to a certain extent, so they must comply with licensing requirements.

The guide says:

If the virtual asset service provider is a natural person, then it should be required to obtain a license or register in the jurisdiction where the business location is located, and countries need to consider several factors to make the appropriate decision.

At the same time, the Financial Action Task Force stated that if individuals use cryptocurrencies to purchase goods or services, or make "one-time transactions or transfers," they are not virtual asset service providers.

The Financial Action Task Force also provided a recommendation to countries to require foreign virtual asset service providers that provide products or services within their jurisdiction to register with the appropriate authorities.

The guidance document states:

The competent authority should take the necessary legal or regulatory measures to prevent the offender or his associate from becoming a beneficiary of the virtual asset service provider or to have a management function in the virtual asset service provider. These measures should include requiring the virtual asset service provider to obtain prior approval from the relevant authorities when there is a substantial change in shareholder, business operations and structure.

For law enforcement purposes, the Financial Action Task Force also recommends that countries consider using open source information and web crawlers to identify unregistered or unauthorized advertising. Countries should also consider “publicly available information” from public feedback, information from reporting agencies, and intelligence or law enforcement reports.

The guide also covers services that confuse cryptocurrency transactions, saying that countries should ensure that providers can manage or reduce the risk of transactions caused by the use of tools (such as mixers, tumblers).

The file reads:

If a virtual asset service provider is unable to manage and mitigate the risks associated with engaging in such activities, the regulatory authority should not allow the virtual asset service provider to engage in such activities.

The Financial Action Task Force stated that virtual asset service providers should also be able to freeze or ban transactions with individuals being sanctioned.

What impact will this proposal have in the short term?

Companies such as data analysis company Chainanalysis warned that the current regulations not only did not improve transparency, but would prompt the relevant service agencies to shut down or find ways to get out of regulation.

However, just last month, the US-led Financial Action Task Force heard these concerns at a private sector consultation meeting in Vienna, but they insisted on their own ideas.

On Friday, US Treasury Secretary Steven Mnuchin said at a plenary session of the Financial Action Task Force in Orlando, Florida:

By adopting the standards and guidelines reached this week, the Financial Action Task Force will ensure that virtual asset service providers will be in the eyes of regulators, which will help the financial technology industry stay away from illegal activities.

Subsequently, he added:

We will not allow cryptocurrencies to become something similar to password accounts. We support the correct use of cryptocurrencies, but we will not tolerate some people using them for illegal activities.

Special reminder: The Financial Action Task Force's recommendations on anti-money laundering policies are not binding; its member states need to adopt legislation or regulations to adopt these measures. However, countries that seriously violate the standards of the Financial Action Task Force will be blacklisted and will have an impact on foreign investment.

The cryptocurrency guidelines introduced this time were issued one week before the G20 annual summit in Osaka, Japan. The G20, a group of 19 countries and the European Union, has been promoting the harmonization of cryptocurrency regulations in various countries.

These guidelines were issued before the end of the one-year chairmanship of the Financial Action Task Force in the United States (the United States will end its term on June 30 this year). Marshall Billingslea, the US Treasury official who rotates, has consistently applied the standards of the Financial Action Task Force to virtual currency as one of its top priorities.