Japan’s bitFlyer suspends new accounts as it checks controls

June 22, 2018
Chris Wheal

Japan’s biggest cryptocurrency exchange bitFlyer has suspended the registration of new accounts to overhaul its anti- money laundering (AML) and know-your-customer (KYC) system.

The Japanese Financial Services Agency

The Japanese Financial Services Agency wants a unified approach: Shutterstock

The move came only days after the Japanese government and local financial authorities called on cryptocurrency exchanges to improve their infrastructures.

On June 16, the Japanese financial authorities asked the Financial Action Task Force (FATF) to implement unified crypto regulations and oversee digital asset exchanges internationally with the same standard and policies.

The call for a unified reflects a campaign to prevent the usage of anonymous cryptocurrencies, which this year has been reflected in a crackdown on culprits such as Monero, Zcash and Dash as well as employing digital assets to finance black market operations such as drug trafficking and distribution.

A G20 problem

“It’s nearly impossible for Japan to handle the problem alone,” said a Japanese Financial Services Agency (JFSA) spokesperson. “Even if trade is restricted to only domestic transfers or monitoring is enhanced, it’s still not enough to counter money laundering. It would be best if all the group of 20 industrial and emerging nations and regions (G20) took the same steps toward prevention.”

On Tuesday this week the Japanese government said that it has requested five registered and licensed cryptocurrency exchanges in the country including bitFlyer and Quoine to overhaul their internal systems, after discovering severe flaws in the internal management systems of the exchanges that handle money laundering prevention and transaction monitoring.

“Upon inspections, the agency concluded there were flaws in the exchange operators’ internal management systems, such as measures to prevent money laundering,” a local report stated. “The JFSA intends to hand down the improvement orders by the end of this week.”

“Upon inspections, the agency concluded there were flaws in the exchange operators’ internal management systems, such as measures to prevent money laundering,” a local report stated. “The JFSA intends to hand down the improvement orders by the end of this week.”

Bad publicity

bitFlyer logo

bitFlyer is now overhauling its AML and KYC controls: Shutterstock

bitFlyer has now suspended new account registrations while it overhauls its internal management system and its AML and KYC processes. Local analysts suggest that the exchange’s swift response is also due in part to a report in Japanese daily the Mainichi Shimbun that the Yakuza, the country’s biggest crime syndicate with over 100,000 members, claimed hundreds of millions of dollars were laundered through major cryptocurrency exchanges.

Both cryptocurrency exchanges and digital asset trading platforms currently have little leverage against the government, following recent hacking attacks suffered by major platforms such as Coincheck and Bithumb.

Although no investors lost their funds in the three attacks, they exposed weaknesses in the systems of the exchanges which operators of the platforms were already aware of.

Post written by Chris Wheal
Chris Wheal is editor of OpenLedger's news and features service. An award-wining business journalists himself, he runs a team of freelance journalists from across the UK and north America.

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