The Financial Action Task Force (FATF) needs financial institutions to prepare for the worldwide progress of digital identification strategies.
FATF printed its draft steering on digital identification Thursday, for governments, regulated entities and totally different stakeholders to implement anti-money laundering (AML) and counter financing terrorism (CFT) legal guidelines.
The intergovernmental group targets to cope with rising security and transparency factors as the strategy of financial transactions grow to be further digital, based mostly on the steering.
On its website online, FATF listed fairly a number of questions showing as “areas of focus,” requesting private stakeholders to provide strategies by means of e mail by Nov. 29, 2019.
The areas embrace the exact risks digital ID could pose to AML/CFT enforcement; the way in which it could help financial inclusion; how a system could assist in transaction monitoring; and the potential affect on implementing FATF’s record-keeping requirements.
Notably, the steering notably lists distributed ledger know-how (DLT) as a tool that will assist inside the progress of digital ID networks. Plenty of blockchain companies have already set their eyes on this specific area, akin to Civic.
In its steering, FATF known as on authorities to “develop clear pointers or legal guidelines allowing the acceptable, risk-based use of reliable, neutral digital ID strategies by entities regulated for AML/CFT features.
Meanwhile, FATF suggests regulated institutions, akin to cryptocurrency exchanges (often called digital asset service suppliers, or VASPs), “take an informed risk-based approach to relying on digital ID systems for Customer Due Diligence.”
The 77-page draft steering particulars many factors related to digital ID strategies, along with their reliability and independence, and the way in which they is more likely to be utilized in performing purchaser due diligence.
The draft steering may also be part of FATF’s effort to the money laundering and terrorist financing risks due to the rise of stablecoins all through worldwide financial strategies.
The group moreover confused the importance of digital identification in payment strategies, which can very nicely be used to find out stakeholders in stablecoin-related transactions.
FATF has been increasingly more full of life inside the blockchain space this 12 months. In June, the group printed its steering for crypto exchanges and totally different VASPs, urging nations to implement strict KYC protocols throughout the swap of digital belongings.
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