FATF: Regulation of virtual assets


October 19 2018

Virtual assets and related financial services have the potential to spur financial innovation and efficiency and improve financial inclusion, but they also create new opportunities for criminals and terrorists to launder their proceeds or finance their illicit activities. The FATF has therefore been actively monitoring risks in this area, and issued guidance on a risk-based approach to virtual currencies in 2015. There is an urgent need for all countries to take coordinated action to prevent the use of virtual assets for crime and terrorism.

The FATF Recommendations set out comprehensive requirements for combating money laundering and terrorist financing that apply to all forms of financial activity—including those that make use of virtual assets. However, governments and the private sector have asked for greater clarity about exactly which activities the FATF standards apply to in this context. The Risk-based Approach requires jurisdictions to identify money laundering and terrorist financing risks and take appropriate action to mitigate those risks. This includes identifying and mitigating illicit financing risks associated with new products or business practices, and other activities not explicitly referred to in the FATF Recommendations.