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[AML, COMPLIANCE, RISK MANAGEMENT] FATF publishes Targeted Update on Implementation of Standards on VAs and VASPs

On 30 June 2022 the Financial Action Task Force (FATF) issued a third targeted update on implementation of the FATF Recommendations within the context of Virtual Assets (VAs) and the Virtual Asset Service Providers’ sector.

The report builds on the FATF’s previous two reviews on implementation by providing a short update on the latest country compliance with a specific focus on FATF’s Travel Rule to respond to particular challenges that countries and private sector face in this area.

The report points to a continued need for various countries among FATF and FSRB members to strengthen the understanding of Money laundering / Terrorism Financing (ML/TF) risks of the VA and VASP sector, and to accelerate enforcement to mitigate such risks.

In particular, the report finds that jurisdictions have made only limited progress over the last year in implementing FATF’s Travel Rule requiring VASPs and other financial institutions to share relevant originator and beneficiary information alongside virtual asset transactions. Thus, only 29 jurisdictions out of the 98 FATF’s March 2022 survey respondents have passed relevant Travel Rule laws, and only small subset of these jurisdictions have started enforcement.

The report further states that despite the vast availability of various technological solutions aimed to facilitate Travel Rule compliance in practice, there is still a need within a private sector to continue increasing interoperability between solutions and across jurisdictions.

Finally, the FATF’s report reviews market developments and emerging ML/TF threats highlighting the continued need to monitor the growth of, and illicit financing risks associated with Decentralized Finance (DeFi), Non-Fungible Tokens (NFTs) and unhosted wallets.

The FATF calls on all countries to address the findings of the report and to implement the FATF’s Standards on VAs and VASPs, including the FATF’s Travel Rule, to mitigate criminal and terrorist misuse of virtual assets.

In the meantime, the FATF will facilitate further discussions with member countries on common implementation, issues and challenges through G7/G20 and other high-level policy bodies; and will continue monitoring market trends for material changes and developments.

Further review of progress and remaining challenges will be conducted by June 2023.

The full version of the FATF update can be found on this link:

https://www.fatf-gafi.org/media/fatf/documents/recommendations/Targeted-Update-Implementation-FATF%20Standards-Virtual%20Assets-VASPs.pdf

For further information, please contact:

Franco Falzon C.P.A. LL.M (Managing Director) or Olga Ivanova LL.M (Legal & Compliance)

E: info@ffinternational.com.mt

T: +356 2010 7771 (office)

M: +356 9989 5679 (mobile)

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