IOTA Foundation supports FATF balanced standard AML/CFT updates

• The IOTA Foundation proposes that Financial Action Task Force (FATF) focuses on industry-specific solutions in its AML/CFT standard review.
• IOTA also highlights support for the latest updates as it argues that non-face-face interactions should not be flagged as high risk.

The IOTA Foundation has announced it will support the recent revision of the Financial Action Task Force (FATF) on “Fighting Anti-Money Laundering (AML) and Terrorist Financing (CFT) Standards.”

First, IOTA argues that the review proposed by the FATF supports proportional risk-based regulations. They say that the decision to replace “proportional” with “proportional” in risk management discussions may seem “irrelevant,” but it shows a major change in increasing clarity of regulations.

IOTA also believes that the FATF proposal will encourage “supervisory review of risk mitigation measures” while ensuring that financial institutions will effectively integrate risk management strategies. Furthermore, they argue that a balanced update to AML/CFT standards will allow for simplified compliance measurements.

It fully supports the drive of FATF for simplified compliance measurements in low-risk scenarios. By reducing barriers to entry, these measures allow startups to develop new business models without unnecessary regulatory hurdles, ultimately promoting growth and competition in the financial sector.

Commenting on the proposal for face-free interactions, IOTA revealed that digital identity solutions are progressing in remote transactions and should not be perceived as high risk in the future. For them, this section of this review is a positive step towards accessibility to financial services while protecting robust AML/CFT.

Apart from the already recognized changes, IOTA suggests that FATF is considering investigating industry-specific solutions. According to them, this ensures that users’ privacy is balanced with compliance.

One potential approach is the use of tokenized customer (KYC) proofs. A notable example is the IOTA Foundation’s KYC solution developed within a European blockchain regulatory sandbox. This framework provides a scalable, secure and privacy-providing way for regulatory compliance in Defi transactions, ensuring user protection while enabling responsible industry growth.

IOTA has invited extensive discussion on the topic by entering into its submission and claiming it is committed to engaging in regulatory reviews and deliberations that affect the financial ecosystem.

International organizations require compliance with FATF guidelines

The FATF exists as a body that sets “global money laundering and counterterrorism and proliferation funding (AML/CFT/CPF) standards.” Recently, with a focus on integrity, we have announced a reportable consultation process to support national regulators in creating effective policies for financial inclusion.

According to a recent blog post, the proposed revised version of the AML/CFT standard appears to define relevant metrics and guide regulators and supervisors to correct “disproportionate AML/CFT measurements” that lead to “unfair financial inclusion.”

In line with the proposed provisions of the FATF, Pakistan has already discussed “robust digital asset regulations and blockchain innovations,” as mentioned in a previous post. The International Monetary Fund (IMF) is also urging Kenya to modernize the Crypto framework to FATF guidelines, as outlined in a recent post.

Prior to this, IOTA had released an equal report to support the position of the International Securities Commission (IOSCO). As highlighted in a previous article, IOTA believes that AI-driven surveillance implementations will help identify economic misinformation and protect retail investors.