Blockchain analysis company Chainalysis have submitted a letter to the Financial Action Task Force, addressing its draft recommendations on national anti-money-laundering and know-your-customer (KYC) procedures.
FATF's draft requires “virtual asset services providers” (VASP) - or crypto exchanges—to “obtain and hold required and accurate originator information and required beneficiary information on virtual asset transfers” so that the information is available should authorities need it. But Chainalysis' leadership team argues exchanges cannot send KYC information to recipient platforms whenever there is a transaction, noting that some recipients do not possess the infrastructure needed. They also note there is currently no way of telling whether a beneficiary uses a VASP or their own personal wallet. Nevertheless, the letter admits VASPs should collect and hold KYC information.
Among its recommendations, Chainalysis suggests using monitoring systems scanning for illicit activity and customer due diligence. It also dissuades FATF from requiring all individuals to register or become licenced, saying such requirements should be for traditional businesses only.
“Forcing onerous investment and friction onto regulated VASPs, who are critical allies to law enforcement, could reduce their prevalence, drive activity to decentralized and peer-to-peer exchanges, and lead to further de-risking by financial institutions. Such measures would decrease the transparency that is currently available to law enforcement,” Chainanalysis writes.
The letter, penned by Jonathan Levin, company’s co-founder and COO, and Jesse Spiro, Global Head of Policy, focuses on article 7(b). If accepted, their recommendations will become part of the FATF Standards in June 2019.