Wednesday, November 21, 2018

Financial Action Task Force calls for ‘urgent’ regulation of virtual assets

By on October 19, 2018

SAN JUAN – The Financial Action Task Force (FATF), an intergovernmental organization founded on the initiative of the G7 economies–Canada, France, Germany, Italy, Japan, the United Kingdom and the United States–to tackle money laundering, said Friday that although “virtual assets and related financial services have the potential to spur financial innovation and efficiency and improve financial inclusion,” they are creating “opportunities for criminals and terrorists to launder their proceeds or finance their illicit activities.”

The FATF, which was holding its plenary meeting in Paris, had already issued guidance “on a risk-based approach” to virtual currencies in 2015, but stressed Friday that there “is an urgent need for all countries to take coordinated action to prevent the use of virtual assets for crime and terrorism.”

The FATF specified Friday that the Risk-based Approach requires jurisdictions to identify illicit financing risks, such as money laundering and financing of terrorism, and amended the FATF Recommendations and Glossary to “clarify” how guidance applies in the case of financial activities involving virtual assets.

The glossary now includes new definitions of “virtual assets” and “virtual asset service providers”–such as exchanges, certain types of wallet providers and providers of financial services for Initial Coin Offerings (ICOs)–to clarify how Anti-money Laundering/Combating the Financing of Terrorism (AML/CFT) requirements apply in the context of virtual assets.

“The changes make clear that jurisdictions should ensure that virtual asset service providers are subject to AML/CFT regulations, for example conducting customer due diligence including ongoing monitoring, record-keeping, and reporting of suspicious transactions. They should be licensed or registered and subject to monitoring to ensure compliance,” the organization said in a release.

The FATF said countries that do not monitor illicit activities will be put on a “gray list.”

See the organization’s 2015 guidance on virtual currencies here. 

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