Financial Crime World

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FATF and FSB Continue to Monitor Cryptocurrency Risks as New Standards Emerge

The Financial Action Task Force (FATF) and the Financial Stability Board (FSB) are intensifying their efforts to monitor the rapidly evolving cryptocurrency landscape, addressing growing risks associated with stablecoins, wallets controlled by individuals, decentralized finance (DeFi), and non-fungible tokens (NFTs).

Four Key Issues

According to a recent statement by Japan’s Financial Services Agency (FSA), there are four critical issues that require immediate attention:

  • Implementing a risk-based approach is crucial in understanding the constantly changing domestic and international risk landscape.
  • Responding promptly to new technologies such as crypto assets, AI, and deepfake videos is essential in addressing emerging risks.
  • Strengthening international coordination and cooperation is vital in combating money laundering, terrorist financing, and proliferation finance.
  • Fostering cooperation among relevant ministries, agencies, and the private sector is critical in promoting effective countermeasures against financial crimes.

FSA’s Efforts

The FSA has emphasized the need for a risk-based approach to combat money laundering and other financial crimes. To achieve this, the agency will:

  • Deepen its analysis of risks related to money laundering and proliferation finance by collecting and analyzing various types of information.
  • Strengthen its supervision of financial institutions (FIs) and reinforce preventive measures by these entities.
  • Conduct outreach activities to improve FIs’ understanding of the risks they face and support enhancements to their anti-money laundering (AML) and combating the financing of terrorism (CFT) measures.

Call to Action

The FSA has called on FIs in Japan to enhance their risk-based AML/CFT measures further. Specifically, FIs are required to:

  • Take firm steps to eliminate identity theft, the use of forged ID documents, anti-social forces, and sanctioned persons.
  • Monitor transactions continuously and identify suspicious transactions based on customers’ known occupation, business type, and behavioral patterns.
  • Develop and implement a shared AML monitoring and filtering system using AI, which is expected to be commercialized in spring 2024.

Conclusion

As the cryptocurrency landscape continues to evolve at a rapid pace, it is essential for all parties concerned to fully understand Japan’s risks and take appropriate actions according to those risks. The FSA’s efforts aim to promote a robust and effective anti-money laundering and combating the financing of terrorism regime in Japan, ensuring the integrity of the financial system and protecting consumers from financial crimes.