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  • Deborah

On July 7, the Financial Action Task Force (“FATF”) has completed its 12-month review that evaluate the implementation by countries and service providers of its revised Standards on virtual assets and virtual asset service providers (VASPs).

The report outlines that the majority of reporting jurisdictions (35 out of 54) have implemented the revised Standards with 3 jurisdictions prohibiting the operation of VAPs.

The report provides FATF’s findings regarding the following points:

Changes relating to ML/TF risks and the virtual asset market since June 2019: no real new information were provided in the report

Public sector’ progress in implementing the revised Standards: Progress is translated mainly by the implementation by jurisdictions of registration and licensing requirements for VASPs

Private sector’s progress in implementing the revised Standards: including

  • The development of technical solutions for the implementation of the travel rule to ensure that originators and beneficiaries of financial transactions are identifiable and are not anonymous. The report outlines that few jurisdictions have implemented the travel rule requirement for VASPs because of the lack of adequate technology solutions. Nevertheless, the FATF stresses the importance of implementing the rule and will provide further guidance to jurisdictions

  • Implementation of other AML/CFT obligations that are still at the early stages most notably because of the rapid technological change in the VASP sector

Issues identified with the revised FATF Standards and Guidance; some of which include among others:

  • The lack of clarity regarding the definitions of stablecoins. Certain jurisdictions requested greater clarity regarding their treatment. Jurisdictions also requested greater clarity regarding the scope and activities of VAPS (including activities relating to safekeeping/ and or administration of virtual assets or instruments enabling control over virtual assets). The FATF will provide further guidance on these issues;

  • The treatment of peer-to-peer transactions and private / non-custodial wallets that are not explicitly covered by AML/TF rules under the revised Standards is also a source of concern for jurisdictions. The FATF will not amend the revised Standards in this regard, but will undertake a further assessment of this aspect.

  • The identification of VASPs for registration / licencing purpose, which have caused difficulties to jurisdictions (e.g. foreign VAPs).

Despite the issues raised by jurisdictions, the revised Standards will not be subject to amendments at this time. The FATF will provide further guidance to addressed some of them and help its members in the implementation process. It will also carry - out a 12- second review by June 2021.

The FATF finalised amendments to its global Standards to place AML/CFT requirements on virtual assets and VASPs were initially published in June 2019.

FATF 12-month Review Virtual Assets and VASPs report can be found here:

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