On June27, 2023, the Financial Action Task Force (FATF) updated its guidance on virtual assets and virtual asset service providers (VASPs), further clarifying compliance expectations amid growing global adoption of cryptocurrencies. The new guidance places significant emphasis on the Travel Rule, customer due diligence (CDD), and beneficial ownership transparency for crypto transactions.

The Travel Rule, originally applied to traditional wire transfers, now mandates that VASPs collect and transmit specific information about the sender and recipient for transactions above certain thresholds. FATF’s updated guidance requires jurisdictions to implement systems to enforce this rule and provide clear compliance expectations to crypto businesses. Non-compliance could result in a jurisdiction being added to the FATF grey list.

The guidance also emphasized the need for effective AML controls in decentralized finance (DeFi) and peer-to-peer (P2P) platforms. While acknowledging the challenges of enforcing rules in these ecosystems, FATF stated that responsibility must still be assigned where control or influence is evident. This has implications for developers, platform administrators, and governance token holders.

Crypto firms must now implement robust identity verification, monitor transactions in real time, and document the origin and destination of funds. They should also ensure that third-party tools used for compliance, such as blockchain analytics platforms, are up to standard. FATF’s guidance serves as a roadmap for aligning crypto AML programs with global financial crime standards.

Source: Virtual Assets: Targeted Update on Implementation of the FATF Standards on Virtual Assets and Virtual Asset Service Providers
Image Source: https://www.fatf-gafi.org/content/experience-fragments/fatf-gafi/en/site/header/master/jcr%3acontent/root/image.coreimg.png/1682926673735.png