The Financial Action Task Force (“FATF”), which focuses on leading global initiatives to address money laundering and terrorist financing, has released a report on the implementation of recommended standards to address AML concerns in the cryptocurrency space over the past four years. The report found that “75% of jurisdictions assessed against the revised criteria are only partially or inconsistent with FATF requirements.” The report describes several barriers to adoption of FATF standards, including a general lack of understanding of cryptocurrency markets by many jurisdictions and the private sector’s development of compliance tools that are limited in scope and cannot be operationalized adequately to meet FATF standards.
At the same time, the report highlights several global concerns that have been exacerbated by the failure to adopt FATF requirements:
- North Korea’s use of “sophisticated internet technologies to gain access to digital networks involved in cyber finance and to steal information of potentially valuable” which is then used to steal money and extort payments in support of its weapons of mass destruction;
- the increased use of cryptocurrencies to fund terrorism by al-Qaeda and ISIS; And
- The growth of DeFi markets where “threat actors misuse DeFi services to engage in and profit from illegal activities, particularly ransomware attacks, theft, fraud, drug trafficking, and proliferation financing.”
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