FATF Virtual Assets Anti-Money Laundering Standards Progress Report: 75% of Jurisdictions Falling Short, Rampant Criminal Misuse

Since 2019, the Financial Action Task Force (FATF) has extended its global anti-money laundering and counter-terrorist financing (AML/CFT) standards to virtual assets (VAs) and virtual asset service providers (VASPs). In order to strengthen the implementation of Recommendation 15 (R.15), which pertains to the regulation of Virtual Assets (VA) and Virtual Asset Service Providers (VASP), FATF adopted a roadmap in February 2023. FATF released a report conducting its fifth targeted review of the implementation of FATF standards on virtual assets and virtual asset service providers, and updated the emerging risks and market developments in this area.

Global Implementation Lags Significantly: 75% of Jurisdictions Falling Short

While some jurisdictions have made progress in implementing relevant regulations, global implementation still lags behind. According to the 2024 survey, only a few jurisdictions have made significant improvements in implementing R.15. The survey shows that as of April 2024, 130 FATF mutual evaluations and follow-up reports have been completed and published, with 75% of jurisdictions partially or non-compliant with R.15 implementation.

Risk Assessment and Regulatory Progress

The 2024 survey shows that 29% of respondents have not conducted virtual asset risk assessments, and 75% of jurisdictions have not conducted sufficient risk assessments. Additionally, 27% of respondents have not decided how to regulate Virtual Asset Service Providers (VASPs). Even in jurisdictions that have decided on regulatory approaches, 60% allow VA and VASP operations, while 14% choose to partially or fully ban them.

Challenges in Travel Rule Implementation

The Travel Rule aims to track virtual asset transactions, but global implementation remains inadequate. The survey shows that nearly one-third of respondents have not passed legislation to implement the Travel Rule; even in jurisdictions that have passed legislation, oversight and enforcement remain low.

Japanese exchanges need to comply with the "Travel Rule" starting from 6/1, and non-custodial wallets also need to conduct investigations

Coinone, a Korean exchange's Travel Rule policy: No external transfers to non-KYC addresses, MetaMask addresses may not receive coins

FATF: Continued Misuse of Virtual Assets

Virtual assets continue to be used to support the proliferation of weapons of mass destruction, as well as being exploited by fraudsters, terrorist organizations, and other illicit actors. North Korea continues to steal or ransom virtual assets and employ increasingly sophisticated money laundering methods. Terrorist organizations, especially ISIL in Asia and groups in Syria, frequently use stablecoins and anonymous cryptocurrencies.

Private Sector Response to Illicit Activities

In contact with FATF's Virtual Assets Contact Group (VACG), the private sector reported market developments, including the increased use of stablecoins in money laundering, terrorist financing, and proliferation financing, as well as ongoing hacker attacks on decentralized finance (DeFi). Some jurisdictions have made progress in risk mitigation measures, such as introducing AML/CFT/CPF requirements for stablecoin service providers and taking regulatory and enforcement actions against DeFi arrangements.

FATF's Conclusions and Recommendations

While some jurisdictions have made progress in introducing anti-money laundering regulations, global implementation still lags. This report highlights key areas for improvement and provides recommendations for the public and private sectors to support global compliance with R.15.

These findings indicate the need for continued efforts globally to strengthen the regulation of virtual assets and Virtual Asset Service Providers to ensure the security and integrity of the financial system. FATF will continue to provide support and guidance to promote compliance processes in various countries and plans to update relevant data in 2025.