'Big News In Global Crypto Policy' As FATF Kicks The Can Towards October
Less than half of the countries who adhere to Financial Action Task Force (FATF) anti-money laundering and countering the financing of terrorism standards have implemented the body’s crypto sector policing protocols – but the body does not yet seem overly concerned and aims to look into this in more detail in October 2021.
The FATF completed its latest plenary session today and remarked in an official release that it had completed its second 12-month review of the implementation of its revised standards on virtual assets and virtual asset service providers (VASPs), such as crypto exchanges.
The report’s authors concluded that “many jurisdictions have continued to make progress in implementing these revisions,” which were introduced back in 2019. The FATF said that 58 out of 128 reporting jurisdictions self-reported the implementation of the revised FATF standards – although this number included six nations that have completely banned crypto exchanges from operating on their territories.
The private sector, it added, has “made progress in developing technological solutions to enable the implementation of the much-maligned Travel Rule.
But the body conceded:
“The majority of jurisdictions have not yet implemented the FATF’s requirements. This disincentivizes further investment in the necessary technology solutions and compliance infrastructure.”
And it claimed that these “gaps in implementation” meant that the world was still a long way from introducing “global safeguards to prevent the misuse of VASPs for money laundering or terrorist financing.”
The body concluded:
“The lack of regulation or implementation of regulation in jurisdictions can enable continued misuse of virtual assets through jurisdictional arbitrage.”
In a press conference, the FATF President Marcus Pleyer appeared relatively unconcerned – and suggested that the next plenary session, slated for October 2021, would deal with the matter in more detail.
Pleyer was speaking after revealing that Malta – a base for some crypto-related firms – had been placed on the FATF grey list. The latter is a list of nations that the FATF claims should be placed under “increased monitoring” measures. Grey-listed countries are instructed to proactively work with the FATF “to address strategic deficiencies in their regimes to counter money laundering, terrorist financing and proliferation financing.”
Malta, which was placed on the list along with Tahiti, the Philippines, South Sudan, is home to a “large number of serious issues,” the FATF head said, including “money laundering issues,” “anonymous shell companies,” and links to “serious organized crime.”
A journalist asked Pleyer if the decision to place Malta on the list had anything to do with crypto regulation (or lack thereof). But the FATF chief answered in the negative, instead stating that the October plenary would deal with crypto policing in more detail.
He stated that the FATF was “now helping countries and the private sector to implement” the standards it issued in 2019 and would “issuance guidance in October” – confirming that crypto policing-related issues were “not an issue” for Malta at this stage.
In the crypto industry, many welcomed the news, pointing out that the “volume of feedback” the FATF had received on consultation papers had forced the body to essentially kick the can down the road.
Some big news in global crypto policy: the @FATFNews was expected to finalize its (quite bad) draft guidance on AML… https://t.co/AJ7KuZ0ad6— Jake Chervinsky (@jchervinsky)
There was a more cautious response from the United States-based Blockchain Association, however, which called the delay a “win, but a small one.” It claimed that one of its “problems” with the guidance included decentralized fiance (DeFi)-related matters, explaining:
“The FATF attempts to address illicit activity in the DeFi ecosystem by expanding the compliance obligations of VASPs to any individual or entity that derives profits ‘whether direct gains or indirect’ from a DeFi protocol.”
But, the association claimed, this approach was “not viable” as it “places regulatory obligations on individuals and entities that, due to the decentralized nature of the protocol, have limited control over how the protocol is accessed or used.”
The association concluded that it recommended the FATF “delay implementation” of its “misguided approach for a year,” which would allow “industry stakeholders and regulators” to develop a new approach “that will actually help regulators to fulfill their mission.”