Tuesday, December 1, 2020

Crypto Firms Assess How to Comply With Anti-Money-Laundering Standards


The cryptocurrency industry is rushing to comply with new anti-money-laundering standards that require exchanges and other firms to share information about their customers.

The standards, adopted in June by the Financial Action Task Force, require cryptocurrency exchanges, some digital wallet providers and other firms to send customer data—including names and account numbers—to institutions receiving transfers of digital funds, similar to a wire transfer at a bank. The goal of the so-called travel rule is to help law enforcement track suspicious activity. The FATF is the global standard-setter for anti-money-laundering.

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But figuring out how to comply with the standards has been something of a puzzle. Crypto firms don’t have the infrastructure in place to send customer data to each other, industry executives say. There is also the challenge of getting firms in a decentralized industry to reach a consensus on how a system for sharing information should be paid for and governed.

“Is it solvable? Yes,” said Jeff Horowitz, chief compliance officer at the digital currency exchange Coinbase. “But is there a method that exists today to share this data? No.”

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Mr. Horowitz—who last year joined the San Francisco exchange from Pershing LLC, a unit of Bank of New York Mellon Corp. —described compliance with the travel rule as one of his top priorities. Coinbase is participating in working groups with other exchanges to develop a plan for compliance, he said.

Under the FATF guidelines, crypto firms must transmit customer data to other financial institutions when transferring $1,000 or more. A similar rule has been in place for U.S. financial institutions since 1996.


Is it solvable? Yes. But is there a method that exists today to share this data? No. — Jeff Horowitz, chief compliance officer at Coinbase, on new standards requiring cryptocurrency companies to share customer information


The FATF, created 30 years ago by the Group of Seven leading nations, conducts regular evaluations of anti-money-laundering laws in its 37 member countries. Receiving a negative evaluation can be embarrassing or, if the violations are severe enough, can restrict a country’s access to the financial system. The U.S. Treasury Department has said the travel rule applies to crypto firms.


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