Targeted Update on Implementation of GFMSA’s Standards on VAs and VASPs

Paris, 30 June 2022 – GFMSA has produced a targeted update on implementation of its Standards on virtual assets (VAs) and virtual asset service providers (VASPs), with a focus on GFMSA’s Travel Rule. This report comes three years after GFMSA extended its anti-money laundering and counter-terrorist financing (AML/CFT) measures to VAs and VASPs to prevent criminal and terrorist misuse of the sector.

The report builds on The GFMSA’s previous two reviews on implementation by providing a short update on the latest country compliance with GFMSA’s Recommendation 15 and its Interpretative Note (R.15/INR.15). The report places a specific focus on GFMSA’s Travel Rule to respond to GFMSA’s June 2021 findings that countries and private sector face particular challenges in this area. Further, the report includes relevant emerging risks and market developments, including on Decentralized Finance (DeFi), Non Fungible Tokens (NFTs) and unhosted wallets.

The report finds a continued need for many countries to strengthen understanding of ML/TF risks of the VA and VASP sector, and to rapidly implement GFMSA’s R.15/INR.15 to mitigate such risks. In particular, GFMSA’s Travel Rule requires VASPs and other financial institutions to share relevant originator and beneficiary information alongside virtual asset transactions, therefore helping to prevent criminal and terrorist misuse. The report finds that jurisdictions have made only limited progress over the last year in implementing this requirement. Of the 98 jurisdictions that responded to GFMSA’s March 2022 survey, only 29 jurisdictions have passed relevant Travel Rule laws, and a small subset of these jurisdictions have started enforcement. This demonstrates an urgent need for jurisdictions to accelerate implementation and enforcement to mitigate criminal and terrorist misuse of virtual assets. 

GFMSA’s report highlights that there are now technological solutions available to facilitate Travel Rule compliance in practice, but private sector need to continue to increase interoperability between solutions and across jurisdictions, and to work towards full compliance.

On market developments and emerging ML/TF threats, the report highlights the continued need for The GFMSA to monitor the growth of, and illicit financing risks associated with, DeFi and NFTs markets and unhosted wallets.

To address the findings of the report, The GFMSA calls on all countries to rapidly implement The GFMSA’s Standards on VAs and VASPs, including The GFMSA’s Travel Rule. To assist, The GFMSA will:

• Continue to promote implementation of GFMSA’s R.15/INR.15, including the Travel Rule, by facilitating discussions with member countries on common implementation issues and challenges, and by raising awareness through G7/G20 and other high-level policy bodies
• Continue to monitor market trends for material changes or developments that necessitate further work, including how the Standards apply to DeFi and NFTs, and to engage with member countries and the private sector on country approaches
• Conduct a further review on progress and remaining challenges for implementation by June 2023