Crypto Regulation To Tighten Scrutiny On Money Laundering

Amid the announcement of a new cryptocurrency – that would be Libra – the Financial Action Task Force (FATF), which operates as global regulatory firm based in Paris with a membership roster of countries such as China and the United States, has said it will boost its examination of digital currencies with an eye on money laundering. That may lead to draft rules and greater oversight than has been seen to date. The FATF has also said crypto companies and exchanges will be registered and will be required to report suspicious transactions, and to perform checks on customers.

As reported, Simon Riondet, who serves as the head of financial intelligence at Europol, has said that money laundering through the use of cryptocurrencies has become more widespread. Europol has found evidence of money laundering at cryptocurrency ATMs. And, as reported by Reuters, at least one cryptocurrency, Monero, has been able to hide all details of a transaction.

This means Libra is likely to see more scrutiny from regulators as the project takes shape and eventually launches. That sentiment was reflected in part by the Bank for International Settlements (BIS), which said this past weekend that there should be coordinated regulations on cryptocurrencies. The BIS pointed to Facebook’s move into the space, where privacy and competitive concerns must be addressed.

BIS Economic Adviser and Head of Research Hyun Song Shin said, according to reports, “To make that coordination possible, I think there would need to be more of a concerted effort on the part of our political leaders to take that forward.” The adviser continued that “the role of Big Tech in finance introduces many new and very unfamiliar elements, which pushes us to take a fresh look at some of the activities that international policymakers engage in. This is something that needs attention sooner rather than later.”

The BIS remarks came on the heels of Bank of England Governor Mark Carney’s statements that Facebook’s announcement shows digital currency cannot be unregulated like social media. “The Bank of England approaches Libra with an open mind but not an open door,” Carney said, as quoted in Reuters. “Unlike social media … the terms of engagement for innovations such as Libra must be adopted in advance of any launch.”

Beyond Cryptocurrencies

Separately and beyond the confines of cryptos, regulators have pointed to other risks within financial services, stating that cyberattacks are among the biggest risks to banks, but there are also complications and challenges tied to financial institutions as they grapple with regulation and testing procedures centered on cybersecurity. As the Financial Times reported, some regulators are pointed toward a multi-agency approach to cybersecurity that would test banks through a coordinated effort.

There is some precedent here, as in assessing credit risk, regulators spanning the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency work together through the Shared National Credit Program. JPMorgan Chase CEO Jamie Dimon has remarked that all of the different testing from multiple agencies makes it “very complicated” to comply with requests.