Summary: FATF’s Status Update on Implementation of Recommendation 15

FATF recently published a status update on the implementation of Recommendation 15 for Virtual Assets (VAs) and Virtual Asset Service Provides (VASPs) by all FATF nations with materially important VASP activity.

Below is a quick summary of the document:

• Purpose and Rationale: The FATF highlights the urgency of regulating VASPs due to the borderless nature of virtual assets. Instances such as the DPRK's alleged theft and laundering of virtual assets to fund weapon proliferation, along with the rise in ransomware attacks demanding payment in virtual currencies, underscore the critical need for a coordinated global response.
• Enhanced FATF Recommendation 15: In October 2018, the FATF enhanced Recommendation 15 to address the challenges posed by VAs and VASPs. This move aims to encourage jurisdictions to adopt robust anti-money laundering and counter-terrorist financing (AML/CFT) measures for the virtual asset sector.
• Methodology for Identifying Jurisdictions: Jurisdictions were selected based on their trading volume and user base, with additional considerations from blockchain analytics companies to ensure accuracy. The document stresses that inclusion in the table is not an indication of a jurisdiction's compliance level or risk profile but rather a snapshot of their implementation status of Recommendation 15.
• Implementation Status: The document provides a detailed tabular presentation of FATF members and non-member jurisdictions with significant VASP activities, showing their progress in implementing Recommendation 15. The table includes data on whether jurisdictions have conducted risk assessments, enacted necessary legislation, registered or licensed VASPs, conducted supervisory inspections, taken enforcement actions, and implemented the travel rule for VASPs.
• Global Effort and Encouragement: The FATF aims to support jurisdictions in effectively regulating and supervising VASPs to mitigate the risks associated with virtual assets. The document calls for continued global collaboration and timely implementation of FATF standards to address the evolving challenges in the virtual asset space.

The implementation status of Recommendation 15 can be visually interpreted with the following graphs:

1. R 1.5 Rating

2. Has conducted a risk assessment covering virtual assets and VASPs

3. Has explicitly prohibited the use of VAs and VASPs

4. Has enacted legislation/regulation requiring VASPs to be registered or licensed and apply AML/CFT measures

5. Has registered or licensed VASP(s) in practice

6. Has conducted a supervisory inspection or included VASPs in its current inspection plan

7. Has taken enforcement action or other supervisory action against VASPs

8. Has conducted a supervisory inspection or included VASPs in its current inspection plan

Conclusion: In summary, the document underscores the FATF's ongoing efforts to enhance global regulatory standards for VASPs to combat money laundering, terrorist financing, and other financial crimes in the virtual asset ecosystem. It highlights the collective actions taken by jurisdictions worldwide and emphasizes the need for ongoing commitment to AML/CFT measures in the rapidly evolving digital asset landscape.