Back in March, the Financial Action Task Force published an updated version of its draft guidelines for cryptos with significant implications for the DeFi space. The document likely signals the growing intent among regulators to implement Know Your Customer compliance protocols for DeFi platforms.
Red flag indicators related to transactions can involve payments that are made in small amounts, or in repeated quantities that fall under a reporting threshold. Alarm bells can also be raised if funds are sent to a newly created or previously inactive account.
Transaction patterns can also rouse suspicion — especially if the deposits made are inconsistent with a customer’s profile.
Other indicators can concern senders and recipients, irregularities when it comes to the source of funds or wealth, and suspicious circumstances related to geography — such as if a customer’s funds originate from, or are sent to, an exchange “that is not registered in the jurisdiction where either the customer or the exchange is located
In its new guidance, the FATF defined most operators of decentralized finance (DeFi) platforms as “Virtual Asset Service Providers” (VASPs). That means that, if the guidelines are adopted in the US and other major jurisdictions as proposed, many DeFi platforms will have to find a way to comply with rules around combating financial crimes. But that won’t be as easy as it may sound.
Innovative areas within cryptocurrency such as decentralized finance (DeFi) are firmly on the radar of global regulators, according to draft guidance released on Friday by the Financial Action Task Force (FATF), a global anti-money laundering (AML) body.