The FATF is the inter-governmental body which sets international standards to prevent money laundering, terrorist financing and the financing of the proliferation of weapons of mass destruction. The FATF has agreed that so-called stablecoins are covered by the revised FATF Standards as either virtual assets or traditional financial assets.
FATF has called on all jurisdictions to implement the revised FATF standards on virtual assets and VASPS (Virtual Asset Service Providers) as a matter of priority
The FATF has worked closely with the FSB, the IMF and other standard-setting bodies in its analysis before coming to this conclusion.
The FATF assessed the potential ML and TF risks posed by virtual assets since 2014 and has been closely monitoring the evolving risks in this space since then.
Under its jurisdiction, FATF identified 3 areas where stablecoins and virtual assets may pose risks:
Anonymity – VASPs must identify customers and maintain transaction records
Global Reach – The FATF ‘travel rule’, which mandates that VASPs obtain, hold and exchange information about the originators and beneficiaries of virtual asset transfers
Layering – This is multiple layering of illicit funds within a short timeframe to disguise origin of funds
Potential for Mass Adoption – While currently relatively small, FATF recommends the same level of trust and security integration with existing providers
The FATF Standards apply to so-called “stablecoins” to guard against money laundering and terrorist financing risks. In a report for the G20, the FATF called on countries to implement the standards as a priority. More here➡️https://t.co/J8RLICOeJ5pic.twitter.com/YNpv1YM9cR
The FATF calls on all jurisdictions to implement the revised FATF Standards on virtual assets and VASPS as a matter of priority
The FATF will review the implementation and impact of the revised Standards by June 2021 consider whether further updates are necessary. This will include monitoring the risks posed by virtual assets, the virtual asset market, and proposals for arrangements with potential for mass-adoption that may facilitate anonymous peer-to-peer transactions
The FATF will provide guidance for jurisdictions on so-called stablecoins and virtual assets, as part of a broader update of its Guidance. This will set out in more detail how AML/CFT controls apply to so-called stablecoins, including the tools available to jurisdictions to address the ML/TF risks posed by anonymous peer-to-peer transactions via unhosted wallets
The FATF will enhance the international framework for VASP supervisors to co-operate and share information and strengthen their capabilities, in order to develop a global network of supervisors to oversee these activities
FATF however advised that the revised standards do not directly place AML / FT obligations on users of virtual assets if they are not financial institutions or VASPS. The revised FATF standards typically only apply to intermediaries such as banks, money service businesses and VASPS.
The standards and controls would thus only explicitly apply when a person interacts with an AML/CT-obliged entity identify their customers and verify their indentity as part of the normal customer due diligence.
You can access the full revised FATF standards on stablecoins using this link.