Financial Action Task Force (FATF)
|Financial Action Task Force|
|Key People||Marshall Billingslea, President|
|Products||Intergovernmental development of anti-money laundering rules|
The Financial Action Task Force (FATF) is an international anti-money laundering policy organization composed of representatives of its member states. It was founded in 1989 by the Group of 7 (or G7), which consisted of the major developed nations: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. FATF coordinates regulatory policies intended to assure the integrity of the financial system with regard to money laundering and terrorist financing. From time to time, it adopts formal "Recommendations," the last of which were published in 2012.
There are now 38 member nations.
In February 2019 FATF published proposed Interpretive Note to Recommendations 15 regarding how the Recommendation should be applied to what it calls "virtual assets" and "virtual asset service providers" ("VASPs"). Cryptocurrency exchanges are included as VASPs. Among other things, FATF proposes that VASPs be registered or regulated in their home countries and that third countries may require local registrations and/or regulation. The proposed Interpretive Note also would require VASPs to provide identity information about the owner of a virtual asset onward to other VASPs when virtual assets are transferred away in, for example, a sale.
In a public comment on FAFT's proposed Interpretive Note, the U.S. analytics company Chainalysis complained that the proposals would be unworkable in many cases because blockchain messages do not identify whether the sender or the receiver of a transaction is a VASP. Chainalysis warned further that adoption of the Interpretive Note would cause transactions to move off VASPs.
The proposals are to be voted on during the June 26-21, 2019 plenary meeting of FATF.
In July 2019, Reuters reported that the FATF was planning on creating an international network for cryptocurrency payments, similar to the SWIFT network used by banks, within a few years. This network was apparently proposed by Japan's Ministry of Finance and the Japanese FSA in June 2019, when it was approved by the FATF. According to the Reuters source, this network would mainly be an attempt by Japanese regulators to fight money laundering using cryptocurrency.
In August 2019, Nikkei Asian Review reported that 15 nations had begun planning a system with the FATF for monitoring international cryptocurrency transactions, in order to crack down on money laundering and the use of digital assets by terrorist and other criminal organizations. The system, for which officials from the 15 countries plan to have a rough outline written up by 2020, would be run by members of the private sector after launch.
July 2020 stablecoin report
On July 7, 2020, the FATF released a report to G20 leaders calling for so-called virtual asset service providers (VASPs) to comply with global anti-money laundering (AML), know your customer (KYC), and anti-terrorist financing (TF) standards. The report mentioned plans to create an international framework to help realize this goal. The report also weighed both the flaws and potential benefits of stablecoins and central bank digital currencies (CBDCs): "As the design of CBDCs will determine their risks, there is also the possibility they may have lower ML/TF risks than cash," the report said. The report also distinguished between "virtual assets" and CBDCs, saying that CBDCs are not the same as virtual assets. The report defined a "virtual asset" as "a digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes, and that virtual assets "do not include digital representations of fiat currencies, securities and other financial assets that are already covered elsewhere in the FATF Recommendations."
- Who We Are. FATF.
- Memebers and Observers. FATF.
- Public Statement – Mitigating Risks from Virtual Assets. FATF.
- Letter of April 8, 2019 to FATF. Chainalysis.
- Calendars. FATF.
- Japan to lead development of SWIFT network for cryptocurrency - source. Reuters.
- New global cryptocurrency system set to fight money laundering. Nikkei Asian Review.
- Crypto Stablecoins Face Increasing Regulatory Scrutiny. Bloomberg.
- FATF Plans to Strengthen Global Supervisory Framework for Crypto Exchanges. Coindesk.
- FATF Report to the G20 Finance Ministers and Central Bank Governors on So-called Stablecoins. FATF.