London Daily

Focus on the big picture.
Thursday, Sep 04, 2025

How Anti-Money-Laundering Rules Hinder Libra's Mission to Reach the Unbankedk

How Anti-Money-Laundering Rules Hinder Libra's Mission to Reach the Unbankedk

The Libra Association is thinking of radical approaches to reach the unbanked in certain locations, including a “step-ladder” approach to know-your-customer (KYC) regulations.

The Financial Action Task Force (FATF) said it is open to working with Libra about potentially building new forms of digital identity. Libra believes blockchain forensics firms like Chainalysis, Elliptic and Coinfirm will help strengthen the case for “tiered KYC” by monitoring wallet profiles and transaction histories.

Non-profits in the Libra Association like Kiva may play a key role.

The organization leading the development of Facebook’s Libra stablecoin is assembling a range of approaches for connecting unbanked people around the world to the proposed blockchain network.


And it all starts with a foundational challenge.

When you use a card or a phone to buy a cup of coffee, a complex system of rules comes down the pipe with that transaction – rules that have checked that you are who you say you are.

Now, imagine you’re a villager in rural Uganda and you have a line of credit with a local shop which runs to $10. It’s hard to see, in spaces almost devoid of infrastructure, how the same class of so-called know-your-customer (KYC) requirements will be applied.

Using digital tools to meet the challenge of identifying and including unbanked people in the global financial system is what Libra and its supporters say is the project’s greatest opportunity.

The scale of that mission is spelled out by Matthew Davie, chief strategy officer at Kiva, a Silicon Valley-based microfinance platform that is one of the Libra Association’s founding social-impact partners.

“We have to see a systems change in how the financial sector works,” he told CoinDesk.

Kiva, which recently announced a partnership with the government of Sierra Leone to use biometrics to assign digital wallets that record transactions on a blockchain, is exploring the concept or tiered KYC, where digital means can be used as a first step to identifying users in situations where government-issued, paper-based identifiers may be scarce. Davie said:

Dante Disparte, head of policy and communications at the Libra Association, also believes the answer to this difficult problem is here, it just needs to be distributed. Citing existing regulatory thinking on tiered approaches to KYC, combined with the transparency of blockchains, Disparte told CoinDesk:

It’s a concept enormously vitalized by the addition of blockchains, Disparte added.

“It goes back to the function of a blockchain and having a network of nodes validating transactions,” he said. “The tamper-resistance of the whole engine means it just becomes a higher-fidelity model with potential risk-reporting in real time, versus a self-reporting network that relies on competitive banks.”

Pointing out that blockchain is a decade-old technology and that digitally native mobile money such as Vodafone’s M-Pesa has already made a difference to financial inclusion, he said:

It’s a concept enormously vitalized by the addition of blockchains, Disparte added.

“It goes back to the function of a blockchain and having a network of nodes validating transactions,” he said. “The tamper-resistance of the whole engine means it just becomes a higher-fidelity model with potential risk-reporting in real time, versus a self-reporting network that relies on competitive banks.”

Pointing out that blockchain is a decade-old technology and that digitally native mobile money such as Vodafone’s M-Pesa has already made a difference to financial inclusion, he said:

It’s important to remember this is all aspirational, however. To be clear, when Libra Association members will develop their own wallets (including Calibra, Facebook’s wallet), those wallet providers must ensure compliance with anti-money laundering (AML) and counter terrorist financing (CFT) requirements and best practices when it comes to KYC checks.


The FATF effect

However, Libra’s ideas regarding a tiered approach to KYC echo the theoretical work done by the Financial Action Task Force (FATF). The thing that differentiates Libra (and particularly Calibra) is the scale at which it could turn this theory into practice, potentially involving billions of users.

Tom Neylan, senior policy analyst at FATF, told CoinDesk, “Of course we will be open to talking with them [Libra].”

Picking up on Disparte’s comments, Neylan said tiered customer due diligence (CDD) in conventional financial services with real fiat currencies is something that’s only just being implemented by a few countries. “Tiered CDD in a digital context is probably something we will have to look at in the future but we haven’t gotten there yet,” he said.

The FATF, which is due to issue draft guidance on digital identity later this month, has issued guidance on CDD and financial inclusion that includes examples from actual practice in Mexico, Uruguay and India.

The type of things involved in tiered CDD, said Neylan, include limited accounts, where users can transact a certain amount of business in a certain period, so X dollars a month, for example; no international transactions; limits of the amount of savings amassed, etc.

Such basic forms of account do not necessarily require a passport or an address, said Neylan adding:

The premise here is that with less functionality comes more ongoing monitoring to ensure that users are not breaking the rules, which is something blockchains are putatively quite good at. As such, users can build up a financial profile over time.

“In some cases, building up a good financial profile can suffice for a lot of what you would do through CDD,” said Neylan. “So that maybe is a model that can simply be applied in the digital world as well.”


Forensic accounts

Another sector of the digital world that sees huge opportunity here is blockchain forensics providers, companies like Chainalysis, Elliptic, Coinfirm and others.

A blockchain-based re-thinking of KYC in this context was summed up by James Smith, CEO and founder of Elliptic, who told CoinDesk:

The combination of a Facebook profile or similar, which can be readily matched to the individual’s blockchain-based transaction history, equals a compelling solution, according to Pawel Kuskowski, CEO and co-founder of Coinfirm.

“You need to properly identify the person, get certain key data points like name, surname, address. If you think about Facebook, this is an excellent source of this type of information,” he said. “Actually, [vetted] Facebook profiling would be far better than the best KYC on the market right now.”

The question of how Libra will approach digital identity remains unanswered. However, the white paper contained a brief but portentous statement that an “additional goal of the association is to develop and promote an open identity standard,” adding that “decentralized and portable digital identity is a prerequisite to financial inclusion and competition.”

This snippet left experts in the digital identity space wondering whether Libra might have an entirely new take on digital identity and KYC, perhaps involving something like a Facebook profile in certain unbanked regions where government-issued documentation is scarce.

As always in these cases, the devil is in the details. Saleem Khan, global leader of data innovation at professional services firm Dun & Bradstreet, said a bridge is needed between the physical and digital, concluding:

Newsletter

Related Articles

0:00
0:00
Close
Putin Celebrates ‘Unprecedentedly High’ Ties with China as Gazprom Seals Power of Siberia-2 Deal
China Unveils New Weapons in Grand Military Parade as Xi Hosts Putin and Kim
Queen Camilla’s Teenage Courage: Fended Off Attempted Assault on London Train, New Biography Reveals
Scottish Brothers Set Record in Historic Pacific Row
Rapper Cardi B Cleared of Liability in Los Angeles Civil Assault Trial
Google Avoids Break-Up in U.S. Antitrust Case as Stocks Rise
Couple celebrates 80th wedding anniversary at assisted living facility in Lancaster
Information Warfare in the Age of AI: How Language Models Become Targets and Tools
The White House on LinkedIn Has Changed Their Profile Picture to Donald Trump
"Insulted the Prophet Muhammad": Woman Burned Alive by Angry Mob in Niger State, Nigeria
Trump Responds to Death Rumors – Announces 'Missile City'
Court of Appeal Allows Asylum Seekers to Remain at Essex Hotel Amid Local Tax Boycott Threats
Germany in Turmoil: Ukrainian Teenage Girl Pushed to Death by Illegal Iraqi Migrant
United Krack down on human rights: Graham Linehan Arrested at Heathrow Over Three X Posts, Hospitalised, Released on Bail with Posting Ban
Asian and Middle Eastern Investors Avoid US Markets
Ray Dalio Warns of US Shift to Autocracy
Eurozone Inflation Rises to 2.1% in August
Russia and China Sign New Gas Pipeline Deal
China's Robotics Industry Fuels Export Surge
Suntory Chairman Resigns After Police Probe
Gold Price Hits New All-Time Record
Von der Leyen's Plane Hit by Suspected Russian GPS Interference in an Incident Believed to Be Caused by Russia or by Pro-Peace or by Anti-Corruption European Activists
UK Fintechs Explore Buying US Banks
Greece Suspends 5% of Schools as Birth Rate Drops
Apollo to Launch $5 Billion Sports Investment Vehicle
Bolsonaro Trial Nears Close Amid US-Brazil Tension
European Banks Push for Lower Cross-Border Barriers
Poland's Offshore Wind Sector Attracts Investors
Nvidia Reveals: Two Mystery Customers Account for About 40% of Revenue
Woody Allen: "I Would Be Happy to Direct Trump Again in a Film"
Pickles are the latest craze among Generation Z in the United States.
Deadline Day Delivers Record £125m Isak Move and Donnarumma to City
Nestlé Removes CEO Laurent Freixe Following Undisclosed Relationship with Subordinate
Giuliani Seriously Injured in Accident – Trump to Award Him the Presidential Medal of Freedom
EU is getting aggressive: Four AfD Candidates Die Unexpectedly Ahead of North Rhine-Westphalia Local Elections
Lula and Putin Hold Strategic BRICS Discussions Ahead of Trump–Putin Summit
WhatsApp is rolling out a feature that looks a lot like Telegram.
Investigations Reveal Rise in ‘Sex-for-Rent’ Listings Across Canada Exploiting Vulnerable Tenants
Chinese and Indian Leaders Pursue Amity Amid Global Shifts
European Union Plans for Ukraine Deployment
ECB Warns Against Inflation Complacency
Concerns Over North Cyprus Casino Development
Shipping Companies Look Beyond Chinese Finance
Rural Exodus Fueling European Wildfires
China Hosts Major Security Meeting
Chinese Police Successfully Recover Family's Savings from Livestream Purchases
Germany Marks a Decade Since Migrant Wave with Divisions, Success Stories, and Political Shifts
Liverpool Defeat Arsenal 1–0 with Szoboszlai Free-Kick to Stay Top of Premier League
Prince Harry and King Charles to Meet in First Reunion After 20 Months
Chinese Stock Market Rally Fueled by Domestic Investors
×