As of 2019, the Financial Action Task Force (FATF) extends its global Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) standards to virtual assets (VAs) and virtual asset service providers (VASPs). In order to strengthen the implementation of Recommendation 15 (R.15, the VA and VASP Code of Practice), the FATF adopted a roadmap in February 2023. FATF released a report on the fifth targeted review of the implementation of FATF standards on virtual assets and virtual asset service providers, and updated emerging risks and market developments in this field.
Global implementation is lagging behind: 75% of jurisdictions are not up to speed
While some jurisdictions have made some progress in introducing relevant regulations, implementation globally still lags behind. According to the 2024 survey results, only a handful of jurisdictions have made significant improvements in the implementation of R.15. The survey shows that as of April 2024, 130 FATF mutual evaluation and follow-up reports have been completed and published, of which 75% of jurisdictions are only partially or completely non-compliant in the implementation of R.15.
Risk assessment and regulatory progress
The 2024 survey revealed that 29% of respondents have not yet conducted a virtual asset risk assessment, and 75% of jurisdictions do not conduct adequate risk assessments. Additionally, 27% of respondents have not decided how to regulate virtual asset service providers (VASPs). Even among those jurisdictions that have decided on a regulatory approach, 60% allow VA and VASP operations, while 14% opt for a partial or complete ban.
Difficulties in enforcing travel rules
The Travel Rule is designed to track virtual asset transactions, but global implementation remains insufficient. The survey showed that nearly a third of respondents have yet to pass legislation to implement travel rules, and even in those jurisdictions that have, regulation and enforcement remain low.
(Japanese transactions must comply with "travel rules" starting from 6/1, and non-custodial wallets also need to be investigated)
(Korea Exchange Coinone Travel Rules and Policies: No external transfers to addresses without KYC are allowed, MetaMask addresses may not be able to receive coins)
FATF: Abuse of virtual assets continues
Virtual assets continue to be used to support the proliferation of weapons of mass destruction, as well as by fraudsters, terrorist groups, and other illicit actors. North Korea continues to steal or extort virtual assets and use increasingly sophisticated methods to launder money. Terrorist groups, especially ISIL in Asia and groups in Syria, often use stablecoins and anonymous cryptocurrencies.
Private sector response to illegal conduct
In an engagement with the FATF’s Virtual Assets Contact Group (VACG), the private sector reported on market developments, including the increased use of stablecoins in money laundering, terrorist financing and proliferation financing, as well as ongoing hacks in decentralized finance (DeFi). Some jurisdictions have made progress on risk mitigation measures, such as introducing AML/CFT/CPF requirements for stablecoin service providers and taking regulatory and enforcement actions against DeFi arrangements.
FATF Conclusions and Recommendations
While some jurisdictions have made progress in introducing anti-money laundering regulations, global implementation still lags. This report identifies key areas for improvement and provides recommendations for the public and private sectors to support global compliance with R.15.
These findings indicate that global efforts still need to be made to strengthen the regulation of virtual assets and virtual asset service providers to ensure the security and integrity of the financial system. FATF will continue to provide support and guidance to facilitate countries’ compliance processes and plans to update relevant data in 2025.
This article FATF virtual asset anti-money laundering standard progress report: 75% of jurisdictions have not done well, and criminal abuse is rampant. First appeared on Chain News ABMedia.