After the FATF completed it's year long review of how it's revised standards have been implemented, we look at what the outcome was, and how Veriff may be able to assist VASPs with meeting those standards.
Mario Alfaro, September 24th, 2020
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The Financial Action Task Force (“FATF”), the global money laundering and terrorist financing watchdog, has completed a 12 month review of the implementation of its revised standards regarding Virtual Assets and Virtual Asset Service Providers (“VASPs”). The FATF has highlighted that further guidance is needed on Virtual Assets and VASPs.
The FATF carried out a 12-month review to measure how the jurisdiction of different countries and the private sector have implemented the revised standards, and also monitor whether there has been any change in the market structure of the Virtual Assets and VASPs sector.
The review focused mainly on evaluating the three following areas:
The review emphasizes that the implementation of obligations and regulations corresponding to anti-money laundering and countering the financing of terrorism is in the initial stages at a global level. There are two main difficulties:
In its review, the FATF states that the public and private sector have made progress in the implementation of revised FATF standards. 35 out of 54 reporting jurisdictions have implemented the revised standards. 32 of these jurisdictions are regulating VASPs and 3 of them are prohibiting the operation of VASPs. The remaining 19 jurisdictions have not taken any action to implement the revised standards in their legal systems.
The FATF concludes in the review that the following actions should be taken:
To get access to the full review, please click here
In June 2019, the FATF made amendments to its global standards to place Virtual Assets and VASPs under the anti-money laundering (“AML”) and counter-terrorism financing (“CTF”) requirements. It required that VASPs must be regulated under the framework of AML and CTF, they should be licensed or registered, and subject to an effective system of monitoring and supervision such as customer due diligence (“CDD”), recordkeeping, suspicious transaction reporting, sanctions and other enforcement measures, along with international cooperation.
Estonia is not a member of FATF, but of MONEYVAL. Estonia had already enacted specific laws regarding the regulation of anti-money laundering and counter-terrorism financing in virtual assets and VASPs. In addition, it is one of the first member states to follow directive number five on anti-money laundering and to include services related to cryptocurrencies as obligated subjects of anti-money laundering laws.
Providing identity verification with excellent fraud prevention means Veriff are well-placed to assist VASPs in complying with FATF standards. Ensuring you know who your customers are, and keep consistent records about their accounts and transactions should enable you to maintain stringent AML and CTF procedures, while also allowing you to assist the authorities with any investigations should they arise.
Veriff is incredibly easy to integrate into an existing system, and we provide ongoing guidance and support to our partners once they've introduced Veriff as their verification provider.
The Financial Action Task Force (FATF) is the global money laundering and terrorist financing watchdog. It’s an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognised as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.
With more than 200 countries and jurisdictions committed to implementing them. The FATF has developed the FATF Recommendations, or FATF Standards, which ensure a co-ordinated global response to prevent organised crime, corruption and terrorism. They help authorities trace criminal funds, related to the dealing of illegal drugs, human trafficking and other crimes.
The FATF reviews money laundering and terrorist financing techniques and continuously strengthens its standards to address new risks, such as the regulation of virtual assets, which have spread as cryptocurrencies gain popularity. The FATF monitors countries to ensure they implement the FATF Standards fully and effectively, and holds countries to account that do not comply.
EDD in banking involves gathering information in order to verify the identity of customers and calculate the exact level of money laundering risk each customer poses. During the EDD process, the customer is asked for a much greater amount of information than they are during the CDD process, as this information can be used to mitigate the risks involved.
When carrying out due diligence, a financial institution must determine whether they should perform customer due diligence (CDD) or enhanced due diligence (EDD). This is because FATF guidance suggests that companies should adopt a risk-based approach to due diligence that reflects the specific level of risk that each individual customer presents.
Synthetic fraud is incredibly dangerous and is a major problem facing the financial sector. Unlike third-party fraud, where an entire identity is stolen and used to defraud enterprises and victims, synthetic fraud frequently has no specific consumer victim.