Japan financial watchdog crackdowns exchanges that offer anonymous transactions

23 May, 2019 | Updated: 23 May, 2019
by Fifi Arisandi
Japan financial watchdog crackdowns exchanges that offer anonymous transactions

Japan is stepping up their anti-money laundering (AML) regulation by requesting financial service providers, such as crypto exchanges to explain their AML procedure.

Japan’s financial authorities, the Financial Services Agency (FSA) is targeting cryptocurrency exchanges that offer anonymous transaction or don’t have proper know-your-customer (KYC) procedure.

The move is taken as part of the efforts to elevate their countermeasures for money laundering, prior to the inspection of the investigatory body of the intergovernmental Financial Action Task Force (FATF) this fall.

The east Asian country expects a different report with the one released in 2008 by the FATF, which gave Japan the lowest possible score for identity verification in financial institutions.

Within a decade, the FSA actually has elevated the country’s financial security framework. Among the efforts was requiring all crypto exchanges in the country to register in order to be able to operate and do business.

The agency also revised the policy that previously allowed users to sign up to financial services using a PO Box and constrained them to use personal home address. 

Last month, Chepicap reported that the agency started implementing a new rule that requires crypto exchanges to ramp up their internal supervision of the crypto wallets that are not connected to the internet.

However, in an on-site inspection to a crypto exchange operator, FSHO in a Yokohama business district last year, the agency discovered multiple suspicious transactions.

Further investigation revealed that the exchange had overlooked many transactions over a short period of time, during which a large amount of cryptocurrency had been cashed out by one of their clients.

Fearing further damage of the negligence, the FSA then rejected FSHO’s proposal to become a registered exchange in the country.

With such finding and the upcoming visit of the FATF, the FSA is now focusing on the implementation of proper anti-money laundering (AML) in all financial service providers, such as cryptocurrency exchange operators, banks and credit unions.

According to Nikkei Asia report, crypto exchanges are currently being asked to elaborate the steps they are taking to prevent money laundering.

The country also wants to ensure that they won’t look bad as they will host the G-20 Summit in Osaka this June, during which Japan will talk in the forum addressing international crypto regulations and probably also initial coin offerings (ICOs).

Stick with Chepicap for more updates on regulation from the crypto space.

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