To minimize the damages caused by financial fraud, Romero proposed the formation of the National Financial Fraud Registry — a centralized record of all crimes and fines related to financial fraud.
CFTC Commissioner Christy Goldsmith Romero recommended regulators modernize its protection measures using technological advances as she warned that failure to do so would have a negative impact on American investors.
Romero, speaking at the North American Securities Administrators Association’s annual meeting in San Diego, California, said that the government’s inability to keep pace with technology would affect the most vulnerable investors. She added:
“As regulators are making policy decisions on next-generation technology, it is critical that we have a foundational understanding of the technology, and its implications for finance and law.”
Spearheading this effort to amp up investor protections and guardrails, Romero appointed technology experts in FinTech, responsible artificial intelligence, cryptocurrency, blockchain, and cybersecurity into the CFTC’s Technology Advisory Committee (TAC).
Thank you @NASAA for a warm welcome. Read here to see my re-proposal for a National Financial Fraud Registry. I proposed this in 2019 as @SIGTARP after conducting hundreds of fraud investigations. https://t.co/mjErLobTmY
— Commissioner Christy Goldsmith Romero (@CFTCcgr) September 12, 2023
The CFTC Commissioner revealed that the TAC experts are tasked with identifying ways to instill Know Your Customer (KYC) and Anti-money Laundering (AML) processes into decentralized finance and crypto investment avenues.
The TAC is also tasked with promoting responsible artificial intelligence (AI) development. According to Romero:
“Federal regulators are just getting started when it comes to AI. A good place to start is governance in making important decisions that impact investors and markets.”
Federal crypto investigations have shifted away from primarily backtracking trade activities to monitoring social media platforms such as X (formerly Twitter), Reddit and Facebook. However, Romero recommended the use of tools to aid such investigations:
“Tracing funds, tracing crypto, using the blockchain, using link analysis, using social media, and data analytic tools should all be in a regulators’ tool kit.”
The statements (tweets/posts) one shares on social media platforms “can be strong evidence of intent,” Romero added. The same platforms can be used by regulators to issue warnings about scams and protect investors.
To minimize the damages caused by financial fraud, Romero proposed the formation of the National Financial Fraud Registry — a centralized record of all crimes and fines related to financial fraud. The registry would help investors background check for any ongoing investigations or fines for fraud imposed on the companies. Romero first proposed the creation of this registry in December 2019:
“Once established, each federal agency would register its convictions, sentencings, civil fines and resolved enforcement actions. State and local agencies could join to achieve a true national fraud registry.”
Romero believes that such a one-stop-shop platform could help investors deter financial frauds. On an end note, the CFTC Commissioner stated that together, federal and state officials can improve investors’ safety.
In April, Romero urged crypto companies to verify the digital identity of users, as she believed that reducing anonymity in crypto could ease managing the associated risks. She added:
“It is possible for all crypto companies to distance themselves from mixers and anonymity-enhanced technology, while still appropriately providing financial privacy for customers.”
Romero encouraged the verification of digital identity, urging exchanges as well as decentralized finance (DeFi) platforms to verify the digital identity of users.
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