FATF Criticizes Poor Implementation of Crypto Travel Rule

The Financial Action Task Force (FATF) has reiterated its call for countries to implement the “Travel Rule” as a crucial measure to combat money laundering and terrorist financing facilitated by cryptocurrencies.

In a recent announcement on June 23, the United Nations body responsible for promoting strategies against financial crimes expressed concern over the lack of implementation of the Travel Rule by many member states.

Following a series of meetings at its headquarters in Paris, the FATF revealed that more than half of the survey respondents had taken no action to implement the rule, which is designed to prevent funds from being transferred to sanctioned individuals or entities.

The FATF emphasized the urgent need for countries to swiftly adopt Anti-Money Laundering and Counter-Terrorism Financing measures for crypto-related activities, highlighting the risk of criminals exploiting significant regulatory loopholes.

According to a survey conducted in March 2022, only 29 out of 98 jurisdictions at the time had met the requirements of the travel rules, and enforcement had only begun in a small subset of those jurisdictions.

The Travel Rule, introduced in June 2019 and last updated in June 2022, aims to address the anonymity associated with illicit cryptocurrency transactions. FATF members agreed to further updates to the rules during the recent meetings.

FATF announced its intention to release a report on June 27, urging member countries to implement its recommendations and close the identified loopholes that criminals seek to exploit. The report will also address North Korea’s alleged involvement in illicit virtual asset activities, where stolen funds are purportedly funneled into its Weapons of Mass Destruction program.

Additionally, the report will discuss emerging risks associated with stablecoins, decentralized finance, non-fungible tokens, and peer-to-peer transactions, as part of the FATF’s ongoing efforts to tackle evolving financial crime threats.

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