FATF Signals More Pressure on Crypto Industry As It Moves 'Too Slow'
International regulators have hinted that they may seek to block global stablecoins if their operators attempt to launch tokens in jurisdictions beyond their remit. Also, they suggested that they could be prepared to redouble their regulatory efforts as Virtual Asset Service Providers (VASPs) struggle to implement earlier guidelines.
Today, at the V20 Summit, an online meeting between crypto industry bodies and international regulators, David Lewis, the Executive Secretary and G20 Deputy of the Financial Action Task Force, (FATF) softened the blow by stating,
“The G20 agrees that payments systems must be updated and that virtual assets can [play a part] in this.”
However, he added that stablecoin issuance would become impossible to police unless all of the 200 countries in its remit “effectively implemented standards.”
Also speaking at the event was Sandra Garcia, the Director of National Security, Threats and Trends, Office of Terrorist Financial & Financial Crimes, United States Department of Treasury and the Co-Chair of the FATF’s Virtual Asset Contact Group.
She echoed Lewis’ sentiments about stablecoins, adding that “revised FATF standards in June 2021 will cover stablecoins,” and suggested that “stablecoins that aim to launch in nations with poor or no Anti-Money Laundering regulations” could be held back.
She added that “Financial and virtual asset classes will be treated the same when it comes to Anti-Money Laundering/Combating the Financing of Terrorism compliance.”
No loopholes allowed
Lewis added that 2019’s guidelines, which included the issuance of the Travel Rule, were “only the first step,” and added that the FATF will not tolerate countries leaving loopholes in their legislation that allows crypto firms to step around the Travel Rule and other anti-money laundering protocols.
Lewis remarked that VASP Travel Rule implementation was “still relatively nascent” with many firms “unused to abiding” by the same sort of regulations that financial service providers have been obliged to adopt.
“The Travel Rule is still not being implemented globally. There is more work for us all to do.”
He claimed that FATF research had found evidence in cases from around the world that crypto and exchange platforms were being used in “money laundering, cyberattacks, human trafficking, sanctions evasion” cases and more, as well as attempts to “move and conceal illicit funds connected with the [coronavirus] pandemic.”
He conceded that these often involved “relatively small amounts,” but pointed to the “involvement of crime rings” as evidence of the severity of the problem.
He suggested that more supervisors would be deployed to help nations implement the regulations.
Although an industry insider at the event has suggested that the Travel Rule is not a good fit for the crypto industry, the FATF appears resolute.
Garcia said, meanwhile, that although there had been some progress in adoption, the rate of compliance among VASPs was still too slow, adding,
“Only 7% of the FATF’s global network has implemented the revised standards. […] We will be providing more tools for supervisors – in the form of best-practice information and guidance on how to conduct examinations [on VASPs].”
Garcia emphasized that the risks of not implementing the travel rule were high, and added,
“I don’t think this industry wants to be seen as one that attracts [criminals] and money-launderers.”
She moved to address concerns about data-sharing rules and the “sunrise issue,” a concern that different nations adopting FATF guidelines at different times will cause disruption and confusion for those attempting to implement global, industry-wide standards.
Garcia stated that the FATF had faced these sorts of problems before and claimed that they were not insurmountable hurdles.
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