Second 12-Month Review of Revised FATF Standards – Virtual Assets and VASPs

FATF have issued its second 12 month review following the implementation of the revised standards for virtual assets and virtual assets service providers (VASPS).

The report finds that many jurisdictions have continued to make progress in implementing the revised FATF Standards. Fifty-eight out of 128 reporting jurisdictions advised that they have now implemented the revised FATF Standards, with 52 of these regulating VASPs and 6 of these prohibiting the operation of VASPs. The other 70 jurisdictions have not yet implemented the revised Standards in their national law. These gaps in implementation mean that there is not yet a global regime to prevent the misuse of virtual assets and VASPs for money laundering or terrorist financing.

The report also includes market metrics on peer-to-peer transactions (i.e. virtual asset transfers that occur without a VASP), based on input from seven blockchain analytic companies. The report found that the market metrics work indicates that a potentially significant amount of virtual assets is transferred on a peer-to-peer basis. The share of illicit transactions also appears potentially higher for peer-to-peer transactions, in number and USD volume compared with transactions with VASPs, at least in terms of direct transactions. However, there were substantial differences in the data provided by the blockchain analytic companies. As a result, the size of the peer-to-peer sector and its associated ML/TF risk remains unclear.

Going forward, FATF advise that all jurisdictions need to implement the revised FATF Standards, including travel rule requirements, as quickly as possible. The FATF will undertake the following actions focused on virtual assets and VASPs.

  • focus on implementing the current FATF Standards on virtual assets and VASPs, including through finalising the revised FATF Guidance on virtual assets and VASPs by November 2021;
  • accelerate the implementation of the travel rule; and
  • monitor the virtual asset and VASP sector, but not further revise the FATF Standards at this point in time (except to make a technical amendment regarding proliferation financing).

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