The Financial Action Task Force (FATF or FATF) is an intergovernmental organization created in 1989 by the member countries of the G-7. Its function is to set international standards and promote the effective implementation of policies, legal, regulatory and operational measures to prevent and combat money laundering, the financing of terrorism and the financing of the proliferation of weapons of mass destruction.
One of its objectives is to protect the international community from threats related to the integrity of the international financial system, where dangerous cryptocurrencies stand out.
FATF cannot issue standards that are regulations in the countries. But it is authorized to make recommendations to the States, which if not followed, carry sanctions. The countries that are part of its gray list, or its black list, are excluded in whole or in part from the global financial system. Right now, for example, Iran and North Korea are on the blacklist.
FATF Report on Virtual Assets
Last June, FATF published a report called “Addressed Update on Implementation of FATF Standards on Virtual Assets and Service Providers”.
It has now been three years since FATF expanded its anti-money laundering and anti-terrorist financing standards in financial activities involving Virtual Assets (VA) and Virtual Asset Service Providers (VASPs), to respond to the threat of evil criminal and terrorist use.
Last October 2021 FATF published an “updated guide” to help jurisdictions and VASPs to implement these control requirements effectively.
From this report, the requirement of the so-called “travel rule” should be highlighted. This consists of forcing to obtain and/or exchange information about the beneficiary and the originator of the transfer in which cryptocurrencies are used.
At the moment, the vast majority of jurisdictions have not yet fully implemented the FATF requirements around crypto assets.
Over the last year, jurisdictions have made only limited progress in introducing the “travel rule”. As of March 2022, while 29 of the 98 responding jurisdictions reported having passed “Travel Rule” legislation, only 11 jurisdictions have initiated enforcement and oversight measures. While around a quarter of responding jurisdictions are now in the process of passing relevant legislation, around a third (36 of 98) have not yet begun to introduce the travel rule. This gap leaves VAs and VASPs vulnerable to misuse and demonstrates the urgent need for jurisdictions to accelerate implementation and compliance.
The June 2022 FATF report highlights that the private sector has made progress over the last year to facilitate the implementation of the Travel Rule. Technology solutions are currently available to support compliance, albeit with some limitations, and travel rule providers have started to take the first steps to ensure interoperability with other solutions. However, the private sector needs to further strengthen interoperability between solutions and ensure full compliance with the FATF Standards, to enable global implementation.
Based on the findings of this report, the FATF has identified the following priorities for action:
First, compliance with the “R.15/INR.15” rule. This rule refers to measures to control terrorism and money laundering in relation to the use of new technologies. Accelerating compliance with R.15/INR.15 will require both the approval of relevant laws by States and their effective implementation.
Second, implement the “travel rule”. Countries that have not introduced Travel Rules legislation should do so as soon as possible, and FATF jurisdictions should lead by example by promoting implementation and sharing experiences and good practices. In turn, FATF must continue to promote cross-border implementation of the Travel Rule and review implementation progress again by June 2023.
Third, the private sector must strengthen efforts to facilitate technological solutions to comply with the “Travel Rule”.
The opinion of the President of BAS, Ignacio Ferrer-Bonsoms
As we already pointed out in a previous article, the European Union is one of the jurisdictions that will require the “travel rule”, apparently with transactions even less than 1,000 euros . Measure, which is even more demanding than that referred to by FATF.