FATF Extends Global Crypto AML Scrutiny After First Review

The U.S. Treasury Department said on June 30, 2020 that the Financial Action Task Force had completed its first 12-month review of international anti-money-laundering standards for virtual assets and virtual asset service providers.

FATF also approved a second review for completion in 2021 and committed to updated virtual-asset guidance, including treatment of so-called stablecoins. The decision kept exchanges, custodial wallet providers and other covered businesses inside a developing global compliance framework while acknowledging that its implementation remained unfinished.

The development mattered beyond any single jurisdiction. FATF sets standards that participating governments translate into domestic laws, licensing systems and supervisory practices. Its recommendations were therefore shaping how cryptocurrency businesses could access regulated financial infrastructure and serve customers across borders, even though FATF itself did not license companies or enact national legislation.

The review followed the 2019 standards

On June 21, 2019, FATF adopted an Interpretive Note to Recommendation 15 that applied its anti-money-laundering and counter-terrorist-financing framework more explicitly to virtual assets and service providers.

The measures called on countries to assess virtual-asset risks, license or register covered providers, supervise them through competent authorities and impose sanctions for noncompliance. Covered businesses were expected to apply controls including customer due diligence, recordkeeping, suspicious-transaction reporting and targeted-financial-sanctions screening.

The framework also applied FATF’s transfer-information requirement, commonly called the Travel Rule, to covered virtual-asset transfers. That obligation required service providers to obtain and hold specified information about transaction originators and beneficiaries and, where applicable, transmit it to another provider.

FATF scheduled the 12-month review because writing a global standard did not establish that national governments had implemented it or that providers possessed interoperable systems for exchanging the required information.

June 30 established the next regulatory phase

Treasury’s June 30 release said the review surveyed implementation by governments and industry. It did not publish the full findings that day. Treasury nevertheless disclosed the principal institutional decisions: FATF would maintain its scrutiny, conduct another review for completion in 2021 and prepare updated guidance for virtual assets and stablecoin arrangements.

That distinction is important. The June 30 action was neither a new United States cryptocurrency law nor a finding that every exchange had become compliant. It recorded a multilateral policy checkpoint and an agreement to continue the implementation process.

The decision also placed stablecoin arrangements within the continuing inquiry. Treasury said FATF had adopted a separate report for G20 finance ministers and central-bank governors concerning the anti-money-laundering, counter-terrorist-financing and counter-proliferation-financing implications of such arrangements. That report, like the complete review, was described on June 30 as forthcoming.

Later context: the findings published July 7

FATF published the complete review on July 7, 2020. Its questionnaire covered 54 reporting jurisdictions: 38 FATF members and 16 members of FATF-style regional bodies. The responses were self-assessments, not formal FATF compliance evaluations.

Thirty-five respondents said they had implemented the revised standards: 32 through regimes permitting and regulating service providers and three through enforced prohibitions. Nineteen said they had not yet established a regime. FATF found no clear need to amend the standards at that stage, but said supervision was generally nascent and Travel Rule implementation still presented technical and cross-border problems.

Those later figures clarify what the completed review contained; they were not public findings in Treasury’s June 30 announcement. The event-day conclusion was narrower but consequential: FATF would preserve the 2019 framework, continue monitoring implementation and give governments and the cryptocurrency industry another year to build a more consistent international compliance system.