On April 19, 2021, the Monero Policy Working Group (MPWG) responded to FATF draft guidance on a risk-based approach to virtual assets and virtual asset service providers.

In summary the key points of our response were:

  • We stated that the updated Guidelines were lacking in brevity, cohesiveness, and clarity.

  • We clearly stated our primary concern was that encouraging broad interpretations of the FATF provided definitions for both VAs and VASPs would not aid in regulatory harmonisation or certainty, especially as we felt there is no reasonable or proportional boundary of what constitutes ‘non-covered activities’.

  • We welcomed the acknowledgement and clarity from the FATF that P2P transactions do not fall under the remit of the FATF, nor within the purview of AML/CTF regulations.

  • We urged clarity on exactly what an ‘anonymization function’ and/or anonymity enhancing cryptocurrency (AEC) is, as opposed to cryptocurrencies or protocols that implement privacy-preserving characteristics.

  • We clearly stated that the FATF Guidelines seemed to treat public good utilities, as well as profit making exercises equally, and that the general public, national bodies, competent authorities and regulators should be made explicitly aware of this change, to improve accountability and transparency moving forward.

  • We respectfully brought to attention that probabilistic analysis of cryptocurrency ledgers poses risks to the overall effectiveness of an investigative approach to anti-money laundering and counter-terrorist financing risk assessment and risk appraisal, including raising possible counter-arguments based on plausible deniability. We also highlighted links to potential sources of harm, including the possibility of data protection liability at the hands of both the surveillance service providers, and the obliged entities, that utilise such methods.

  • We welcomed the fact that the guidance makes clear, in numerous places, relevant authorities should coordinate to ensure required information can be shared between VASPs (‘the Travel Rule’) in a manner that is compatible with national data protection and privacy rules.

Please see our response in full here.

The Monero Policy Working Group (MPWG) is responsible for this content. This is not legal advice, and it should not be relied upon for any purpose by third parties. To learn more about the MPWG, click here.