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FAFT action plan aims for "timely global implementation" of crypto norms

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(Kitco News) - The Financial Action Task Force (FAFT), the intergovernmental organization with members from more than 200 jurisdictions developed to combat money laundering, has agreed to implement an action plan related to crypto assets, according to a report from its recent Plenary meeting.

“In a major milestone, the FATF agreed on revisions to Recommendation 25 on transparency and beneficial ownership of legal arrangements,” the report said. “Delegates further agreed on an action plan to drive timely global implementation of FATF standards relating to virtual assets (also termed crypto assets) globally, including on the transmission of originator and beneficiary information.”

The Plenary for the global money-laundering and financial crimes coalition includes 206 members from organizations like the United Nations, the International Monetary Fund and the Egmont Group of Financial Intelligence Units (FIU).

Virtual assets have proven instrumental in helping criminals conceal their ill-gotten gains from activities like ransomware attacks, which have been on the rise in recent years and have a “crippling impact on business activity and lead to disruptions of infrastructure and services.”

“Given the transnational nature of ransomware attacks, it is essential that authorities in each country build on and leverage existing international cooperation mechanisms to successfully tackle the laundering of ransomware payments,” the FAFT said. “Authorities also need to develop the necessary skills and tools to quickly collect key information, trace the nearly instantaneous virtual transactions and recover virtual assets before they dissipate.”

To achieve this, authorities will need to collaborate with cyber-security and data protection agencies as well as their traditional law enforcement counterparts.

A major barrier to the efforts by FAFT has been the fact that many countries have failed to implement their recommendations for virtual asset service providers (VASPs), such as the ‘travel rule’ which “requires obtaining, holding and transmitting originator and beneficiary information relating to virtual assets transactions.”

FAFT originally published its updated standards for virtual assets in 2019, but as of June 2022, it reported that only 11 of the 98 jurisdictions surveyed were enforcing the travel rule, and they encouraged member countries to enact them faster.

For this reason, the Plenary has agreed on a roadmap to strengthen the implementation of FAFT standards on virtual assets and VASPs, which will include a review of current levels of implementation across the global network. The task force will provide an update on the steps that its member countries have taken to regulate and supervise VASPs.

Japan to enforce FAFT rules to prevent cryptos from being used for money laundering

Aside from virtual assets, criminals have also utilized art and antiques to help launder money, which is another area of focus for FAFT.

“The trade in high value works of art and antiquities can attract criminals who seek to exploit the sector’s history of privacy and the use of third-party intermediaries to launder the proceeds from drug trafficking, corruption and other crimes,” the report said. “Many jurisdictions do not have sufficient awareness and understanding of the risks associated with these markets. This results in a lack of investigative resources and expertise, and difficulties with pursuing cross-border investigations.”

To help on this front, FAFT has compiled a report, scheduled to be released on Monday, that includes a list of risk indicators that can help public and private sector entities identify suspicious activities in the art and antiquities markets, and highlights the importance of rapidly identifying and tracing cultural objects involved in money laundering or terrorist financing.

“The report includes some good practices that countries have taken to address the challenges they face, including the establishment of specialized units and access to relevant databases and cooperation with experts and archaeologists to help identify, trace, investigate and repatriate cultural objects,” they wrote.

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