FATF Urges Greater Adoption of Travel Rule to Curb Illicit Crypto Fund Flows
- FATF has called for greater adoption of Digital Asset Service Provider Travel Rule to curb illicit fund flows using cryptocurrencies.
- The Travel Rule was amended in 2019 to require Digital Asset Service Providers to collect and share data about the source and destination of digital asset transfers over $1,000.
- Russia’s membership has been suspended, and Jordan has been greylisted due to digital asset risk assessment deficiencies.
Cryptocurrency-related ransomware schemes decreased in 2022, but analytics firm Chainalysis argues there could still be unflagged suspicious crypto addresses.
- Adoption of FATF’s 2019 rule may lead to a further reduction in the flow of illicit funds. to centralized exchanges.
- Blockchain firms must develop secure ways of sharing counterparty information while ensuring privacy.
The Financial Action Task Force (FATF), the global anti-money laundering watchdog, has urged countries to adopt a travel rule for the Digital Asset Service Provider to tackle the flow of illicit funds using cryptocurrencies.
In its latest report, the FATF called for improved digital asset regulation in FSRBs and its member-states, urging them to impletment the Travel Rule and other AML (anti-money laundering) recommendations to the crypto industry. The Travel Rule was amended in 2019 to require Digital Asset Service Providers to collect and share data about the source and destination of digital asset transfers over $1,000.
What we are going to learn?
Suspension of Russia’s Membership and Greylisting of Jordan
The Financial Action Task Force has also suspended Russia’s membership due to the country’s ongoing war with Ukraine and placed Jordan to its “grey list” for virtual asset vulnerability gaps.
Decrease in Cryptocurrency-related Ransomware Schemes
Additionally, the drop in such ransomware attacks could be attributed to victims who are increasingly not agreeing to attackers’ demands, as insurance companies that provide coverage for losses or damages resulting from cyber attacks or other digital threats implement stricter policies.
Adoption of FATF’s 2019 Rule Could Shrink Illicit Fund Flows
The implementation of FATF’s 2019 rule may lead to a reduction in illicit funds flowing into centralized exchanges, which is where most ransomware earnings went in 2022.
Cryptocurrency firms that adhere to the new FATF regulations are required to establish secure methods for exchanging counterparty information while still maintaining privacy.
Sanctioning of Ethereum Mixer Tornado Cash
Last year, the U.S. Treasury Department sanctioned Ethereum mixer Tornado Cash after it was used to obfuscate the movement of $96 million from the Horizon Bridge attack.
The FATF’s latest report highlights the need for greater adoption of anti-money laundering recommendations, including the Virtual Asset Service Provider Travel Rule. The report also shows that while cryptocurrency-related ransomware schemes decreased in 2022, there is still work to be done to tackle illicit fund flows. The adoption of FATF’s 2019 rule could help to further shrink these flows to centralized exchanges