Financial Crime World

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LIBERIA: Cryptocurrency and Financial Crime on the Rise

The growing popularity of cryptocurrency has brought new challenges for financial institutions in Liberia, with the risk of financial crime increasing significantly.

Market Capitalization Reaches $1 Trillion

According to a recent report by the Treasury’s publication “Crypto-Assets: Implications for Consumers, Investors, and Businesses”, the market capitalization of all crypto-assets has hovered just below $1 trillion since June 2022.

Consumer Interest in Digital Assets Services

As consumers show growing interest in digital assets services, traditional financial institutions are under pressure to adapt to this new reality. Research by Raddon Research Insights reveals that:

  • 28 percent of Liberian consumers are very or extremely interested in having digital asset banking and custody services as part of their banking relationship.

Regulatory Uncertainty Remains

However, regulatory uncertainty remains a significant hurdle for financial institutions looking to enter the digital assets space. Despite this, traditional financial institutions must prioritize identifying and understanding the key threats, vulnerabilities, and illicit financing risks related to virtual assets, as outlined in the Treasury’s Action Plan.

FATF Guidance on Virtual Assets

The Financial Action Task Force (FATF) has also issued updated guidance on virtual assets, emphasizing the importance of conducting counterparty due diligence prior to partnering with Virtual Asset Service Providers (VASPs). The FATF recommends that financial institutions:

  • Confirm whether a VASP or payment service provider has performed a thorough risk assessment of its Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) program
  • Perform their own risk assessment to understand key factors such as:
    • Size and structure
    • Ownership
    • Products and services
    • Geography
    • Channels

Importance of Customer Due Diligence

By performing appropriate levels of customer due diligence regarding strategic alliances with VASPs and payment service providers, traditional financial institutions can:

  • Increase their likelihood of creating long-lasting business relationships
  • Address compliance with evolving regulatory expectations

Mitigating Risks Associated with Financial Crime

However, the increasing risk of financial crime in Liberia’s digital assets space demands that financial institutions remain vigilant in their efforts to meet customer demand without compromising the integrity of their AML/CFT programs.

Conclusion

In conclusion, as Liberia’s financial institutions navigate the complex and rapidly evolving world of cryptocurrency, it is essential they prioritize AML/CFT compliance and due diligence practices to mitigate the risks associated with financial crime. By doing so, they can ensure the integrity of the financial system and protect the interests of their customers.