The IOTA Foundation has recently expressed its support for the Financial Action Task Force’s (FATF) revision of the Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) standards. The foundation believes that the proposed changes will help to strike a balance between risk management and financial inclusion.
One of the key points raised by IOTA is the importance of proportionate risk-based regulations. They emphasize that the shift from “commensurate” to “proportionate” in risk management discussions signifies a significant change that will enhance regulatory clarity. This change is expected to encourage a supervisory review of risk mitigation measures and ensure that financial institutions effectively integrate risk management strategies.
Furthermore, IOTA applauds FATF’s proposal to simplify compliance measures in lower-risk scenarios. By reducing barriers to entry, startups can develop new business models without unnecessary regulatory hurdles, thus fostering growth and competition in the financial sector.
In relation to non-face-to-face interactions, IOTA argues that digital identity solutions have advanced to the point where remote transactions should not be automatically flagged as high risk. They view this aspect of the revision as a positive step towards improving accessibility to financial services while maintaining robust AML/CFT measures.
Additionally, IOTA suggests that FATF explore industry-specific solutions to ensure a balance between users’ privacy and compliance. One such solution proposed by IOTA is the use of tokenized Know Your Customer (KYC) proofs, which they have developed within the European Blockchain Regulatory Sandbox. This framework offers a scalable, secure, and privacy-preserving method for regulatory compliance in decentralized finance transactions.
In conclusion, IOTA invites FATF and industry stakeholders to engage in extensive discussions on these topics, demonstrating their commitment to participating in regulatory reviews that impact the financial ecosystem.
In other news, there has been a call from international bodies for adherence to FATF guidelines. FATF plays a crucial role in setting global AML/CFT/CPF standards, and its recent consultation process aims to assist national regulators in crafting effective policies for financial inclusion while maintaining integrity.
Countries like Pakistan and Kenya are already considering robust digital asset regulation and blockchain innovation to align with FATF guidelines. The International Monetary Fund (IMF) has urged Kenya to modernize its crypto framework in accordance with FATF standards.
Prior to these developments, IOTA released a report supporting the International Organization of Securities Commissions (IOSCO) in calling for tailored regulation to guide the operations of financial experts. They believe that implementing AI-driven monitoring can help identify financial misinformation and protect retail investors.
Overall, the support for FATF’s revised standards and the push for industry-specific solutions demonstrate a commitment to enhancing regulatory compliance while promoting innovation and growth in the financial sector.