FATF has published a draft guide for implementing digital identification systems. The guide also covers the work of cryptocurrency and blockchain companies.
The financial action task force on money laundering (FATF) has published a draft guide
digital identification for governments, regulated entities, and other stakeholders to ensure compliance with anti-money laundering (AML) and counter-terrorist financing (CFT) regulations.
According to the guidelines, the intergovernmental organization seeks to address emerging security and transparency issues as the financial transaction process moves more and more into the digital realm. On its website, the FATF listed a number of key questions, asking interested parties to provide feedback by email by November 29, 2019.
These issues include the specific risks that digital identification can pose to ensuring compliance with AML/CFT laws, how the technology can help expand access to financial services, how the system can help monitor transactions, and the potential impact on meeting FATF accounting requirements.
In particular, the guide refers to distributed registry technology (DLT) as a tool that can help the growth of digital identity networks. In its guidance, the FATF called on authorities to “develop clear guidelines or regulations that allow for the proper use of independent digital identification systems by organizations regulated for AML/CFT purposes.”
Meanwhile, the FATF suggests that regulated institutions, such as cryptocurrency exchanges, “use an informed risk-based approach when deploying digital identification systems to properly verify customers.”
The 77-page draft guide details many of the issues related to digital identification systems, including their reliability and independence, and how they can be used in conducting customer due diligence. The draft guide was created as part of the FATF’s efforts to combat money laundering and terrorist financing due to the growth of
use of stablecoins in international financial systems.
The organization also emphasized the importance of digital identification in payment systems, and the possibility of using the technology to identify stakeholders in transactions related to stablecoins.
In June, the FATF group published
the final version of the recommendations for regulating cryptocurrencies and the activities of cryptocurrency service operators. Recall that the final version of the recommendations obliges cryptocurrency exchanges to exchange information about customers.