Reporting “limited progress”, FATF urges countries to introduce legislation for its travel rules

Reporting “limited progress”, FATF urges countries to introduce legislation for its travel rules

The Financial Action Task Force (FATF) reported that 11 of the 98 jurisdictions that responded have begun to apply their regulations on combating the financing of terrorism, or CFT, and against money laundering, or AML.

In an update published on Thursday on the “Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers”, the FATF reported that the “vast majority” of jurisdictions assessed by the organization’s Global Network since June 2021 “still require significant or moderate improvement” in AML/CFT compliance under the travel standard. According to the FATF, countries moving toward implementing these requirements made “limited progress” over the past year, with 29 of the 98 responding jurisdictions reporting that they have passed laws related to the travel rule, and 11 have started enforcing them. .

“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 started to introduce the Travel Rule,” the FATF said. “This gap leaves VAs and VASPs vulnerable to misuse, and demonstrates the urgent need for jurisdictions to accelerate implementation and compliance.”

A new FATF report on virtual assets finds that only 29 out of 98 jurisdictions have passed the FATF “Travel Rule” to ensure crypto businesses verify who their customers are. FATF members must lead by example and introduce the relevant legislation as soon as possible.

The organization added that private sector companies had made progress in introducing solutions to support travel rule compliance and “taking early steps to ensure interoperability with other solutions.” Nevertheless, The FATF stressed the need to implement these solutions quickly, given the “significant threat of ransomware actors misusing VAs to facilitate payments” and channeling illicit funds through Virtual Asset Service Providers, also known as Virtual Asset Service Providers. like VASP.

“Countries that have not introduced Travel Rule legislation should do so as soon as possible, and FATF jurisdictions should lead by example by promoting implementation and sharing experiences and good practices. […] Swift implementation by jurisdictions will further incentivize progress.”

Among other developments since 2021 is the increased growth of decentralized finance, or DeFi, and non-fungible projects, which the FATF called a “hard-to-enforce area” of the travel standard. The organization cited a Chainalysis report published in February that “suggests that threats of criminal abuse continue” with illicit DeFi transactions, reaching similar conclusions for NFTs that are potentially used for “money laundering.” money and wash trading”.

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According to FATF guidelines, value-added service providers operating in certain jurisdictions must be licensed or registered. The organization reported in an April update that about half of the jurisdictions assessed in 120 countries had “adequate laws and regulatory structures” to assess risks and verify beneficial owners of companies, urging them to prioritize identification and notification. of information on cryptocurrency transactions.

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