FATF Secretary-General T Raja Kumar stated that combating illicit digital financial flows necessitates “coordinated global action.”
FATF & G7 Nations on Crypto
T Raja Kumar, the head of the Financial Action Task Force (FATF), stated that the G7 nations must be more proactive in regulating the “lawless crypto space,” which continues to allow for illicit financial transactions around the world.
Kumar made the remarks in a letter released ahead of the G7’s 2023 Summit in Hiroshima on May 19, where the group will discuss various agenda items for the year, including cryptocurrency regulation and the overall industry.
Unlawful digital financial flows
The FATF’s head stated that the organization is working on “multiple fronts” to assist countries in combating “digital financial flows” that are “fueling crime and terrorism.”
According to Kumar, eradicating these flows requires “coordinated global action” to ensure that no “safe haven” exists in the global financial system for such transactions.
The FATF’s Recommendations — global standards for combating money laundering, terrorism financing, and proliferation financing — have been updated to include crypto-assets and related financial activity.
However, Kumar stated that countries have made “relatively poor” progress in implementing the Recommendations’ new standards.
As of 2019, the regulator estimated that only 27% of countries were compliant with the updated crypto standards, while the remaining 73% are completely or partially non-compliant and have yet to begin work on crypto industry supervision.
Kumar also stated that some G20 countries are among the 73% who are not in compliance. He stated:
“This unacceptable situation must be urgently addressed.”
The FATF chief stated that many countries lack the experience to combat illicit financial flows when they go digital, and the watchdog plans to launch a new program — including the so-called “travel rule” — to assist them in adapting.
The travel rule will require virtual asset service providers, such as exchanges, to share information about crypto transactions that exceed a certain threshold with one another and with regulatory bodies.
Recommendations have been updated
According to Kumar, the FATF recommends that countries immediately begin working on two areas to ensure that cryptocurrencies are not used for illicit financial transactions.
The first is ensuring beneficial ownership transparency, which is “critical in combating money laundering, corruption, tax evasion, and sanctions evasion.”
Criminals exploit the lack of transparency in ownership laws to conceal their financial activity through complex corporate structures, according to Kumar, and countries must implement the FATF’s updated recommendations to close these loopholes.
The second area in which countries must concentrate their efforts is the recovery of criminal proceeds. Kumar wrote that asset recovery builds trust in law enforcement by directly assisting victims and is a “effective” method of combating economic crime.
Countries, on the other hand, have done very little work on asset recovery, and only a small portion of global illicit financial flows are ever recovered.
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