Crypto and money laundering – new FATF rules are much appreciated!

Spread financial intelligence

The Financial Action Task Force (FATF) is an independent inter-governmental body with the mission to develop 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 recognized as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.

On June 21, 2019, the FATF released its awaited recommendations on regulating cryptocurrencies for its 37 member countries and honestly, we just love them.

Quite a number of our EFRI victims deposited their money with scam brokers via cryptocurrency exchanges following the instructions received from the fraudsters. Once the transfer was completed the clients’ money was gone for good. Any request for help was either not answered by the involved crypto exchanges or was defended with some nebulous excused about missing data or data hardly available and so on.

The so-called “travel rule” requirement set by the FATF “ will require Virtual Asset Service Providers” (VASPs), including crypto exchanges, to pass information about their customers to one another when transferring funds. This will hopefully change the almost hopeless situation in the cybercrime scene.

Definition of a Virtual Asset Service Provider

“Virtual asset service provider” is any natural or legal person who is not covered elsewhere under the Recommendations and as a business conducts one or more of the following activities or operations for or on behalf of another natural or legal person:

  • Exchange between virtual assets and fiat currencies;
  • Exchange between one or more forms of virtual assets;
  • Transfer of virtual assets; and
  • Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets;
  • Participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.

The Travel Rule

In the finalized FATF guidance VASPs are required to gather and transfer originator name, originator´s account number (the VA wallet), originator’s location information, beneficiary name and beneficiary account number (their VA wallet).

The so-called “travel rule” requires crypto exchanges to collect and transfer customer information during transactions between exchanges.

“… obtain and hold required and accurate originator [sender] information and required beneficiary [recipient] information and submit the information to beneficiary institutions … if any. Further, countries should ensure that beneficiary institutions … obtain and hold required (not necessarily accurate) originator information and required and accurate beneficiary information …”

FATF rules

The “following the money” approach is very often the only possibility to identify the fraudsters – beneficial owners – in online scams. We have learned this during the last couple of months. Even if dozens of offshore companies and nominee directors are involved most of the stolen money always ends up with the ultimate perpetrators.

The guidance issued by the FATF also addresses services designed to obfuscate the origin of crypto transfers, saying nations should make sure that providers can either manage or mitigate the risks of transfers that use mixers, tumblers or similar tools.

“If the VASP cannot manage and mitigate the risks posed by engaging in such activities, then the VASP should not be permitted to engage in such activities,

We understand that the crypto industry rejects these requirements due to substantial admin efforts ahead, but after having heard quite a lot devastating stories from defrauded people, we more than welcome such recommendations.

FATF gives its 37 member countries 12 months to adopt the guidelines, with a review set for June 2020. Let’s hurry up, every single day retail investors are ripped off by fraudsters using cryptos for their illicit business. The sooner the rules are applied the better.


Leave a Reply

Your email address will not be published. Required fields are marked *