A plenary of the Financial Action Task Force (FATF), under the German Presidency of Dr. Marcus Pleyer took place this past week. The meeting provided several updates on key regulatory items including standards set for “Virtual Asset Service Providers” or VASPs.
According to a statement issued by FATF regarding a 12-month review of Standard’s on virtual assets and VASPs, the group finds that many jurisdictions have continued to make progress in implementing these revisions, but shortcomings remain.
FATF states that so far, 58 out of 128 reporting jurisdictions have now implemented the revised FATF Standards, with 52 of these regulating VASPs and six of these prohibiting the operation of VASPs.
Importantly, FATF claims that the private sector has made progress in developing technological solutions to enable the implementation of the ‘travel rule’. This new rule requires VASPs to maintain records for both buyers and sellers of digital assets – somewhat similar to banking requirements. The goal is to halt illicit activity and money laundering affiliated with digital assets.
FATF reports that the majority of jurisdictions have not yet implemented the FATFs requirements, including the travel rule stating:
“These gaps in implementation also mean that we do not yet have global safeguards to prevent the misuse of VASPs for money laundering or terrorist financing. The lack of regulation or implementation of regulation in jurisdictions can enable continued misuse of virtual assets through jurisdictional arbitrage.”
FATF states that jurisdictions must implement these FATF standards as soon as possible.
A full report pertaining to VASPs will be published on July 5, 2021.
FATF remains concerned that technology may be used for illicit activity in financial services while noting that tech may also be used to halt abuse while encouraging innovation.
“When implemented using a responsible and risk-based approach, new technologies and innovative products and services can also improve financial inclusion, bringing more people into the regulated financial system and thereby reinforcing the effectiveness of AML/CFT measures.”
The AML/CFT report will be published on July 1, 2021.