Major Crypto Exchanges Face Action Over Money-Laundering Fears
Japan's Financial Service Agency is further cracking down on what it considers lax compliance with AML rules at larger, licensed exchanges.
Japan's financial watchdog is reportedly planning to force improvements at a number of licensed cryptocurrency exchanges over perceived issues with internal systems, including anti-money laundering (AML) measures.
According to a report from Nikkei on Tuesday, the country's Financial Service Agency (FSA) intends to ensure full compliance with current AML rules at larger exchanges as their holdings of customer funds rapidly increases. The report suggests at least five exchanges, including bitFlyer, Quoine, and Bitbank, are on the FSA's list to receive "business improvement orders" this week.
The report said that, based on its recent inspections, the FSA found that some licensed exchanges still do not have sufficient measures in place for spotting suspicious transactions. Further, the agency is also concerned that the firms have not recruited enough staff to cope with the growing volume of transactions on their platforms.
Back in April, the FSA was already raising questions over what it considered a loosely enforced ID-verification process at bitFlyer, after which the firm pledged it would strengthen its procedures.
The agency also issued business improvement orders in March to a number of registered but lesser known cryptocurrency exchanges – including GMO Coin and Tech Bureau – as part of its review of crypto trading platforms following the $530 million Coincheck hack in January.
And, earlier this month, the FSA gave its first-ever license rejection to cryptocurrency exchange FSHO after having issued two suspension orders to the firm over its alleged failure to properly implement security and AML improvements.
The latest move by the FSA comes just days after a Japanese self-regulatory group of cryptocurrency exchanges proposed to strengthen their AML measures by prohibiting member platforms from listing anonymous cryptocurrencies such as monero and dash.
Formed in the aftermath of the Coincheck hack, the Japanese Virtual Currency Exchange Association consists of major exchanges such as bitFlyer, Bitbank and Quoine.
Japanese yen and BTC image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.