Updates from FATF and EU
5th July 20231. FATF publishes a targeted update on the implementation of the FATF Standards on VAs and VASPs
The FIAU would like to inform subject persons that the FATF has recently provided a specific update regarding the implementation of the FATF standards concerning virtual assets and virtual asset service providers (VAs and VASPs). This report offers an overview of the current status of countries’ adherence to FATF’s Recommendation 15 and its Interpretative Note, which includes the Travel Rule. Additionally, it provides insights into emerging risks and market developments, including Decentralized Finance (DeFi), Peer-to-Peer transactions (P2P), Non-Fungible Tokens (NFTs), unhosted wallets, and stablecoins.
According to this report, it has been observed that jurisdictions are still encountering difficulties in fulfilling essential obligations such as conducting risk assessments, establishing legislative frameworks for regulating VASPs, and conducting supervisory inspections. Furthermore, inadequate progress has been made by jurisdictions in implementing the Travel Rule, a crucial measure for anti-money laundering and combating the financing of terrorism. This situation raises significant concerns due to the escalating risks associated with VAs and VASPs, whereas the absence of proper regulation creates significant vulnerabilities that can be exploited by criminals.
The FATF is reviewing suggestions for modifying the wording of Recommendation 8 of the FATF Standards and its Interpretive Note (R.8/INR.8). This amendment is focused on safeguarding Non-Profit Organizations (NPOs) from being exploited for terrorist financing purposes. The proposed changes aim to tackle the issue of excessive implementation of preventive measures within the NPO sector in certain countries, recognising the adverse effects that such measures can have on the legitimate activities of NPOs.
More information on the consultation process, including a copy of the document itself, and how feedback may be submitted, can be accessed from the FATF’s website.
The deadline for submission of comments or feedback is 18 August 2023.3. EU Commission Delegated Act on High Risk Third Countries
The Financial Intelligence Analysis Unit (FIAU) would like to bring to your attention the latest Delegated Act of the European Union’s (EU) Commission on High Risk Third Countries, which was adopted by virtue of Delegated Regulation (EU) 2023/1219 of 17 May 2023,and published in the EU’s Official Journal of 26 June 2023. A copy of this document has been uploaded on the FIAU’s website under ‘Country Statements’.
In terms of Article 9(4) of Directive (EU) 2015/849, the European Commission is to identify third countries which present strategic deficiencies in their AML/CFT regimes, and which pose a significant threat to the EU’s financial system (“high risk third countries”). The resulting list, which is reviewed and updated from time to time, is then made public through delegated acts. The list of countries in the Annex to Delegated Regulation (EU) 2016/1675 has now been revised to include Nigeria and South Africa, while Cambodia and Morocco have been excluded from such list.
A high risk third country is considered as a non-reputable jurisdiction in line with the definition provided under Regulation 2(1) of the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR). It is important that in ensuring compliance with their obligations under Regulation 11(10) and Regulation 11(11) of the PMLFTR, as well as with Section 8.1.1 and Section 8.1.3 of the FIAU Implementing Procedures – Part I as they may be applicable, subject persons should also take note of the EU’s consolidated list of high risk third countries.
While the resulting list of high risk third countries presents similarities with the FATF’s own lists, it is important that subject persons are aware that the two are not identical and a country may be present on one list but not on the other.
Any queries in relation to the above should be addressed to [email protected]