As a financial services practitioner who has been in the industry for over a quarter century, I experienced a few occasions where legacy framework of sound global finance was put to the test by the advancement of technology. The meeting recently held in Osaka, Japan was one of those occasions.
Concurrent to the G20, Virtual Asset Service Providers (VASPs) Summit, called the V20, was held with participants from government bodies, trade associations and private entities mainly from Asia. I was pleased to take part in this conference aimed at reaching consensus around proper regulation and development of the emerging crypto asset sector.
The main topic of the conference was the recently released Finance Action Task Force (FATF) rules on AML compliance. While there has long been a need to apply standardized rules globally, many participants agreed that excessive regulation may impede innovation. Case in point was the “travel rule”- whereby originator and beneficiary information need to be exchanged between VASPs - similar to what banks are required for wire transfers.
FATF set out requirements, giving VASPs a window of twelve months to implement them. There were participants voicing concerns around the high bar and limited time schedule for implementation. While such requirements would be an added burden to the compliance function, these steps are inevitable.
Another point discussed was about the scope of those requirements. If regulations are not implemented in an exhaustive manner, certain services may take advantage of loopholes to stay off the radar. This may create added opportunity for regulatory arbitrage, not only across jurisdictions and between traditional-new financial service sectors, but also between lawful-unlawful service providers.
At Liquid, we are cognizant of FATF’s prominent influence across its member countries, which also include jurisdictions we have physical operations in. Member countries are requested to implement FATF recommendations to combat money laundering and terrorist financing, based on their own regulatory frameworks.
While details are yet to be worked out, the conference made meaningful progress in just two days. As an outcome of the conference, there was a broad directional agreement to implement necessary rules to develop a sound financial sector. As one of the first steps, it was agreed that a neutral third party, preferably a non-profit organization, should be set up as a governing body.
To capture such outcome at a high-level, a Memorandum of Understanding was signed by participating trade associations in the region.
Going forward, the community has work cut out to develop the details toward shaping the future of finance. We welcome the opportunity to take part in implementing effective yet practical set of regulations to help mature the industry. As a financial services professional, I am committed to continue providing value where technology innovation, risk management and regulatory compliance intersect in the field of global finance.
Note: Reprinted with permission from the original: https://www.linkedin.com/pulse/fatf-regulatory-impact-from-v20-summit-rei-tanaka