New anti-money laundering regulations to target crypto exchanges

Billions laundered through top crypto exchanges in 2019

The Financial Action Task Force (FATF) is looking at exerting more control over crypto exchanges to combat money laundering.

U.S. Treasury Secretary Steven Mnuchin remarked upon the new FATF guidelines at a conference in Orlando, Florida.

Steven Mnuchin

Tightening the screws

The FATF, a multi-government agency that is comprised of roughly 200 countries, is clamping down on cryptocurrencies being used in money laundering, terrorism support, and other criminal activities.

As such, the agency is instituting requirements focused on crypto exchanges, requiring them to implement the same AML/CFT protocols that traditional financial institutions have to do.

The protocols that crypto exchanges are being tasked with include:

  • Identify who they are sending funds on behalf of, and who is the recipient of those funds;
  • Develop processes where they are required to share that information with other providers of virtual assets, and law enforcement;
  • Know their customers and conduct proper due diligence to ensure they are not engaging in illicit activity; and,
  • Develop risk-based programs that account for the risks in their particular type of business.

“By adopting the standards and guidelines agreed to this week, the FATF will make sure that virtual asset service providers do not operate in the dark shadows,” says Mnuchin.

“This will enable the emerging FinTech sector to stay one step ahead of rogue regimes and sympathizers of illicit causes searching for avenues to raise and transfer funds without detection,” he added.

While the vast majority of crypto transactions are not illicit in nature, Simon Riondet, the head of financial intelligence at Europol, says that the use of cryptocurrencies in money laundering is on the rise.

“We also have some investigation on the dark web in which the payments are made in cryptocurrencies, sometimes in bitcoin, and they are switching it to more anonymized cryptocurrencies,” Riondet told Reuters.


Some concerns

While quite a few people do not view increased regulatory oversight on the cryptocurrency ecosystem as a bad thing, there are lots of others who do not care for losing what amount of anonymity they currently enjoy.

Adding more layers of red tape increases the cost of doing business for crypto exchanges, and it should be pointed out that many critics of the FATF guidelines say that current blockchain technology would have to be changed at a fundamental level to adjust to the new protocols.

Another point of consideration is that the FATF and Secretary Mnuchin say that they support virtual currencies, yet many central banks, which work with the FATF, are not fans of cryptocurrency at all.


One such example is Jens Weidmann of Germany’s central bank who said that stablecoins could undermine banks if their use becomes widespread.

The governor of the Bank of England, Mark Carney, has long been a foe of Bitcoin and other cryptocurrencies.

He believes cryptocurrencies pose a threat if they become more enmeshed in the financial world and their use vastly increases.

“Crypto-assets raise a host of issues around consumer and investor protection, as well as their use to shield illicit activity and for money laundering and terrorist financing,” he wrote last year.

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