FATF Says Most Countries Still Haven’t Implemented AML Watchdog’s Crypto Guidance

FATF Says Most Countries Still Haven’t Implemented AML Watchdog’s Crypto Guidance

The majority of countries overseen by the Financial Action Task Force (FATF) have yet to put in place the requirements set out for firms that handle cryptocurrencies.

Speaking Friday on the occasion of its second 12-month review of progress on crypto regulation, the intergovernmental anti-money laundering (AML) watchdog said so far, 58 out of 128 reporting jurisdictions have implemented the revised FATF standards.

Of those, 52 are regulating virtual asset service providers (VASPs) and six are prohibiting the operation of VASPs.

Implementing regulations built for traditional finance onto pseudonymous-by-design crypto has been challenging. That said, it’s been over two years since the FATF announced crypto would come under its AML rules, and the regulator is now asking stragglers to get their houses in order.

The private sector was praised for its progress in developing technological solutions to enable the implementation of the so-called “travel rule” – data sharing requirements to identify those involved in crypto transactions over a certain amount.

“However, the majority of jurisdictions have not yet implemented the FATFs requirements, including the ‘travel rule,’” the FATF said in a press statement. “This disincentivizes further investment in the necessary technology solutions and compliance infrastructure.”

These gaps in implementation, the FATF said, means there are not yet global safeguards to prevent the misuse of VASPs for money laundering or terrorist financing, leading to “jurisdictional arbitrage.”

The role played by cryptocurrencies in ransomware, high in the news of late, also got a mention.

“The report also identifies potential future FATF actions to prevent the misuse of virtual assets for criminal activities, including by placing emphasis on actions to help mitigate the risk of ransomware-related virtual asset use,” the FATF said.

The FATF issued draft guidance back in March which included some additional wording on decentralized finance (DeFi) and stablecoins. CoinDesk reported Thursday that due to a very large amount of feedback, particularly relating to areas like DeFi, it was likely the guidance would not be updated until the next FATF plenary meeting in four months’ time.

That appears to have borne out, with the FATF announcing a decision to finalize its VASP rules in October 2021.

“This revised Guidance will help assist jurisdictions and the private sector to implement the revised Standards as a priority,” the FATF said.