Tuesday, October 20, 2020

US official: Facebook’s Libra will be under money-laundering scrutiny

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Facebook Inc’s planned Libra cryptocurrency will have to comply with American anti money-laundering standards in order to survive, even if it’s based in Switzerland, a senior US official in charge of combating terrorist financing warned.

The US government is “looking very carefully at Libra,” Sigal Mandelker, the under secretary for terrorism and financial intelligence, told reporters on Tuesday at a briefing at the US embassy in the Swiss capital Bern.

“The point we have impressed upon them a number of times is that in order for them to operate they have to have the right anti-money laundering and countering terrorist financing sanctions programmes in place,” she said. “I think they’re still in the very early stages of thinking through how they’re going to do that.”

US lawmakers have expressed serious concerns about the potential criminal misuse of Libra and possible privacy violations. Democrat Maxine Waters, who chairs the House Financial Services Committee, took issue with Facebook’s choice of Switzerland as the base for Libra, saying in a July speech that the country’s “history as a monetary haven for criminals and shady corporations” was grounds for suspicion.

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Regardless of where Libra “chooses to incorporate,” Mandelker said, “they will have to comply with US standards if they’re going to survive.”

Switzerland, by contrast, gave Facebook an enthusiastic reception when the social-media giant announced in June that Libra would be based in Geneva.

The Swiss State Secretariat for International Finance said Libra’s arrival was a “positive sign that Switzerland can play a role in an ambitious international project.”

Related: US Watchdog Groups Call for Congress to Put a Freeze on Facebook’s Libra

Mandelker spoke before heading to meetings with Swiss regulators including Finma, which licenses financial services companies in Switzerland.

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Acknowledging Waters’ comments about Switzerland’s role as a tax haven, Mandelker said “that’s going to be the perception and that’s why it’s extraordinarily important for the Swiss to continue to make sure that number one on their list is these AML-CFT concerns. I have every confidence that they will continue to do so”.

Libra director David Marcus has said that the company won’t go ahead ahead with the currency until regulators and governments across the world are satisfied.

Swiss regulators have recently been more circumspect. In July, the Swiss data protection commission (FDPIC) wrote to Marcus demanding to know how it plans to protect customer data and privacy, and expressing surprise that Marcus had mentioned the role of the Swiss regulator in televised US Congressional hearings without reaching out to the FDPIC first.

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