Financial Crime World

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New Standards Emerge to Address Risks from Stablecoins, Decentralized Finance, and Non-Fungible Tokens

The global financial landscape is undergoing a significant shift with the rapid growth of stablecoins, decentralized finance (DeFi), and non-fungible tokens (NFTs). In response, the Financial Action Task Force (FATF) and the Financial Stability Board (FSB) are working together to monitor the changing risk landscape for crypto assets, including stablecoins.

Four Major Issues

To address these emerging risks, experts identify four key areas of concern:

  • Risk-Based Approach: Implementing a thorough risk-based approach is crucial in understanding and addressing the rapidly evolving risks associated with crypto assets. This includes analyzing sanctions evasion risks and taking measures to reduce such risks.
    • Analyzing sanctions evasion risks
    • Taking measures to reduce sanctions evasion risks
  • Responding to New Technologies: The spread of new technologies, such as AI and deepfake videos, requires authorities and financial institutions (FIs) to respond promptly to emerging risks and leverage digital transformation to improve the effectiveness and efficiency of countermeasures.
    • Responding promptly to emerging risks
    • Leveraging digital transformation
  • International Coordination: Strengthening international coordination and collaboration is essential in combating money laundering, terrorist financing, and proliferation finance. This includes cooperation with international organizations like the Interpol and UNODC, as well as bilateral agreements with other countries.
    • Cooperation with international organizations
    • Bilateral agreements with other countries
  • Cooperation Among Relevant Ministries and Agencies: Close coordination among relevant ministries and agencies, as well as between the public and private sectors, is necessary to combat money laundering. Industry associations play a critical role in supporting businesses and formulating self-regulatory rules.
    • Coordination among relevant ministries and agencies
    • Coordination between public and private sectors

Government Efforts

To address these concerns, the Japanese government has taken concrete measures:

  • Deepening Risk Analysis: The National Public Safety Commission has been enhancing its risk assessment report, which will be further deepened to analyze risks related to money laundering and proliferation finance.
  • Strengthening Supervision of FIs: The Financial Services Agency (FSA) will conduct targeted examinations to review whether FIs have appropriate frameworks in place to satisfy all the requirements of the AML/CTF Guidelines by the end of March 2024.
  • Publicity Activities: The FSA will promote publicity activities to educate users of FIs about the importance and necessity of AML/CTF measures.

Call to Action

The FSA urges FIs in Japan to enhance their risk-based AML/CTF measures further, emphasizing the need for continuous monitoring and identification of suspicious transactions.