Posted on 04-06-2020.
The Financial Action Task Force (FATF) issued a report on the level of compliance with its recommendations in the U.S. It turned out, the country isn’t following the crypto-related recommendations exactly to the letter. In this piece, we explain the FATF Recommendations in general and the one that addresses crypto, as well as look at how well the U.S. is following them and what to make of it.
“The threat of criminal and terrorist misuse of virtual assets is serious and urgent, and the FATF expects all countries to take prompt action to implement the FATF Recommendations in the context of virtual asset activities and service providers,” the financial watchdog said in a press release.In simple terms, Recommendation 15 requires countries to introduce mandatory licensing or registration for virtual asset service providers (VASPs), monitor their activities, and have a punishment for AML/CFT violations. It also requires respective local authorities to share information with their foreign counterparts. The service providers themselves, such as crypto-exchanges, are required to collect and keep transaction records available to authorities on-demand.
“The CDD threshold for occasional transactions for MSBs is USD 3 000 (as opposed to USD 1 000 required in the FATF Standards) and this higher threshold is not clearly supported by low ML/TF risks,” reads the report.Another deficiency pointed out in the report is that the U.S. legislation doesn’t explicitly include VASPs that are incorporated in the U.S. but don’t perform “any activity relating to U.S. persons, or a U.S.’ nexus.” This is something for lawmakers to consider before it becomes a loophole and a problem. The FATF also noted that the U.S. is inspecting cryptocurrency providers without specifically identifying “higher risk VASPs” but trying to process them all one by one, which isn’t effective in terms of AML/CFT.
“It is not entirely clear whether the current approach is sufficiently risk-focused, especially since only 30% of all registered CVC providers have been inspected since 2014.”Given that the other aspects of compliance are apparently on point, the FATF concluded that the U.S. is “Largely Compliant.” Almost there, except for these minor kinks. Considering the nature of the deficiencies pointed out by the FATF, the U.S. authorities seem to be rather cooperative. When it comes to building a framework for the new type of assets that tends to defy national borders, cooperation on the international level is definitely a nice thing to have. Although, whether the internationally adopted surveillance-heavy approach to regulation will benefit the mass adoption of crypto is up to debate. Follow us on Twitter and Facebook and join our Telegram channel to know what’s up with crypto and why it’s important.