Global Regulators Urge Better Understanding of Crypto-Related Money Laundering Risks

FATF members are calling for better understanding of money laundering risks stemming from cryptocurrency transactions.

The 37 member states behind the Financial Action Task Force (FATF) are calling for improved understanding of money laundering risks at a time when cryptocurrencies are steadily growing in popularity, South Korea’s Yonhap news agency reported on Monday.

Last week, the FATF held its regular meeting in Paris, where South Korea’s Financial Services Commission (FSC) briefed the attendees on its anti-money laundering policies for digital currency trading and its obligations related to preventing illegal cash transfers through virtual money.

South Korea is among the biggest cryptocurrency markets, and fears that Seoul could ban digital currency trading saw the price of Bitcoin and other virtual coins spiral downward in late January.

The market calmed down after South Korean finance minister Kim Dong-Yeon announced the government was changing its earlier tough stance on cryptocurrency trading, opting instead to impose a ban on anonymous trading. It now requires of financial institutions to diligently follow KYC (Know Your Customer) procedures by verifying client identities.

Under the new rules, South Korean financial companies are obliged to monitor transactions meticulously and conduct in-depth due diligence on customers engaged in cryptocurrency transactions. These requirements are further directed at digital currency exchange operators suspected of using employee accounts for cryptocurrency-related transactions.

Despite the stringent requirements, the new rule has been welcomed by the nation’s digital currency space. Expectations are that cooperation between regulators and industry players will “normalize” the market.

Kim Haw-joon of the Korea Blockchain Association stated:

“Though the government and the industry have not yet reached a full agreement, the fact that the regulator himself made clear the government’s stance on cooperation is a positive sign for the markets.”

European Commission hesitant to regulate cryptos

Peter Kerstens, head of the European Commission’s fintech task force, recently said digital currencies do not constitute an urgent matter for the EU executive body despite warnings that the new asset class is highly volatile.

He told a forum organized by EURACTIV that Europe remains largely shielded from risks posed by cryptocurrency volatility since the bulk of activity takes place in Asia. Kersten stated:

“We should think of what are the risks in order to know what should be regulated.”

He suggested the G20 would be the proper forum to launch any regulatory response because cryptocurrencies “require global action.”

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