FSA Orders Six Japanese Crypto Exchanges to Improve Anti-Money Laundering Systems
A total of six licensed Japanese crypto exchanges, including bitFlyer, have had sloppy anti-money laundering (AML) systems brought into question by Japanese financial regulator, the Financial Services Agency (FSA). The FSA issued a “business improvement order” demanding those exchanges address their AML failings to protect their consumers. The Japanese government appears to be buckling down to keep the crypto ecosystem free of “dirty money”.
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bitFlyer Stops Onboarding Customers Amid FSA Improvement Order
After an on-site inspection at the exchanges, the FSA issued an order to fix a number of shortcomings in AML procedures that could prove to be advantageous for wrongdoers, as reported by Reuters. The six crypto exchanges asked to fortify their AML setups were bitFlyer, Tech Bureau, BTC Box, Bit Point, Quoine, and Bit Bank.
In response to the FSA order, bitFlyer announced a provisional cessation of the onboarding of new customers until all improvements noted in the FSA order are actualized.
As per the bitFlyer announcement:
“The order received by bitFlyer Japan relates to the compulsory ID verification procedures of our operations in Japan. As a result, we will be re-examining the ID verification for certain existing customers. To ensure this process is completed quickly and effectively, we will be voluntarily and temporarily suspending the onboarding of new customers.”
bitFlyer’s tone indicates its intention to cooperate with regulators. However, the FSA’s “administrative penalties” were not limited to fixing anti-money laundering flaws, but also demanded that exchanges deploy proper systems to list new virtual currencies, develop a management system to safeguard user information, and also establish appropriate ways to combat systemic risks.
As noted by bitFlyer, exchanges are required to submit a documented plan on how they aim to tackle flaws listed in the FSA order. Until all improvements are made, exchanges are to report the progress of implementing fixes on the 10th of every month. bitFlyer appears willing to get its ducks in a row.
Shaking Out the “Dirty Money”
The Japanese regulatory mood has been stringent since the $530 million USD Coincheck hack. As a result of the mega-heist, the FSA is being more cautious when issuing new licenses. At present, there are 16 sanctioned exchanges in the country. Not long ago, the FSA denied crypto exchange FSHO an operating license, as it had received two administrative punishment orders.
The Japanese financial watchdog seems to be doing everything possible to clean up Japan’s crypto space. A recent report in local newspaper Mainichi Shimbun indicated that organized crime rings were using cryptocurrencies to clean their dirty money. Per its findings, a single criminal group has laundered over $274 million over two years with its preferred tokens being anonymity-focused coins Monero, Dash, and Zcash. The FSA has been pressuring exchanges to delist those tokens.
Nonetheless, the enthusiasm for crypto in Japan has not faded, with many even predicting institutional capital entering the crypto market. The Japanese Yen still accounts for a whopping proportion of the global bitcoin trade.
Will Japanese crypto exchanges be able to comply with a more demanding regulatory environment? Share your views in the comments section below.
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