The Financial Action Task Force (FATF) has raised red flags regarding the lack of implementation of rules in regulating the virtual digital assets sector by many nations. According to a recent report by the FATF, the delay in adopting these crypto-related rules is creating opportunities for criminal activities to thrive.
The FATF, a Paris-based global financial watchdog, has been advocating for stricter regulations to curb the misuse of crypto assets by criminals for money laundering or terror financing. In a bid to address these issues, the FATF laid down a roadmap in February 2023 to strengthen the implementation of standards on virtual assets and virtual asset service providers (VASPs). However, the report revealed that numerous countries have yet to fully enforce the FATF’s requirements on virtual assets, leaving a gap for illicit financial activities to occur.
One of the major concerns highlighted by the FATF is the importance of regulating VASPs in a timely manner, given that virtual assets are inherently international and borderless. Failure to regulate VASPs in one jurisdiction can have serious global implications, especially in terms of money laundering and terror financing. To address this issue, the FATF has directed nations to only permit licensed firms to engage in transactions involving crypto assets. Additionally, countries are required to gather information about senders and receivers of crypto assets, particularly in cases of suspicious transactions.
The FATF has compiled a list of nations indicating their compliance with the laid out criteria around crypto activities. While India has demonstrated full deployment of the FATF rules, other countries such as Australia, Finland, Greece, Malaysia, and Portugal are still in the process of implementing these regulations. Ashish Singhal, the Co-founder of India’s CoinSwitch crypto exchange, praised India’s proactive approach in conducting risk assessment of VASPs and implementing the Travel Rule.
The FATF’s report underscores the urgent need for nations to expedite the implementation of regulations governing the virtual digital assets sector. Failure to take timely action could result in increased criminal activities involving crypto assets, posing significant risks to global financial systems. It is imperative for countries to prioritize compliance with FATF standards to ensure a more secure and transparent ecosystem for crypto transactions.