Last year the Financial Action Task Force (FATF) asked jurisdictions worldwide to adopt its virtual assets’ regulatory guidelines. At the V20 conference today, held online, David Lewis—executive secretary and G20 deputy at the organization—gave an overview of how implementation and business response have gone so far. The FATF is an intergovernmental organization tasked with combating money laundering. Lewis told conference attendees that the majority of jurisdictions have now transposed the guidelines into domestic law.
Crypto firms’ adaptation to the travel rule and wider FATF framework remains “relatively nascent.”
FATF directives for regulating cryptocurrencies include a controversial section dubbed the “travel rule,” designed to mitigate illicit uses of crypto assets and bring the sector into line with traditional banking regulations. However, when it comes to crypto businesses—known formally as “virtual asset service providers,” or VASPs—FATF deputy said that their adaptation to the travel rule and wider FATF framework remains “relatively nascent.” He also acknowledged that progress had been made on the technical front, as firms try to improvise new solutions to help them be more efficient in their compliance measures.
Travel Rule is not being implemented effectively.
The FATF deputy also asserted that travel rule is “not yet being implemented globally or effectively” in the private sector. According to Lewis, the organization is discerning new risks and intends to keep its eye on the corresponding regulatory challenges it faces. He also said that there has been an increased use of crypto to move illicit funds during the global pandemic. Moreover, there is evidence that crypto is being tapped more frequently by professional money laundering networks. While the total value of crypto used for illicit activities remains small, it is being exploited to launder money from the sale of drugs and illicit arms, child exploitation, human trafficking, and sanctions evasion, Lewis said.