Countries failing to adhere to anti-money laundering (AML) guidelines for cryptocurrencies could find themselves added to the “grey list” of the Financial Action Task Force (FATF).
According to to a November 7 report by Al Jazeera, sources say the global financial watchdog plans to conduct annual audits to ensure countries are complying with AML and counter-terrorism financing (CTF) rules on crypto providers.
The gray list refers to the list of countries that the FATF deems to be “Jurisdictions under Enhanced Monitoring.”
The FATF says countries on this list have committed to resolving “strategic gaps” within agreed timeframes and are thus subject to increased monitoring.
It differs from the FATF “blacklist”, which refers to countries with “significant strategic deficiencies in relation to money laundering”. a list which includes Iran and the Democratic People’s Republic of Korea.
Currently, there are 23 countries on the gray listincluding Syria, South Sudan, Haiti and Uganda.
Crypto hotspots such as the United Arab Emirates (UAE) and the Philippines are also on the gray list, but according to FATF, both countries have made a “high-level political commitment” to work with the global financial watchdog to strengthen their AML and CFT regime.
Pakistan was also previously on the list, but after taking 34 actions to resolve FATF concerns, they are no longer subject to increased monitoring.
One of the anonymous sources quoted by Al Jazeera noted that while failure to comply with crypto AML guidelines will not automatically put a country on the FATF gray list, it could affect its overall rating, causing some to fall under increased monitoring.
Cointelegraph reached out to the Financial Conduct Task Force for comment but had not received a response at the time of publication.
In April 2022, the AML watchdog reported that many countries, including those with virtual asset service providers (VASPs), do not comply with its Countering Financing of Terrorism (CFT) and Anti-Money Laundering (AML) standards.
Under FATF guidelines, VASPs operating within certain jurisdictions must be licensed or registered.
In March, it found that several countries had “strategic deficiencies” in relation to AML and CTF, including the United Arab Emirates, Malta, the Cayman Islands and the Philippines.
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In October, Svetlana Martynova, the Counter-Terrorism Financing Coordinator at the United Nations (UN), noted that cash and hawala were the “main methods” of terror financing.
However, Martynova also emphasized that technologies such as cryptocurrencies have been used to “create opportunities for abuse”.
“If they are excluded from the formal financial system and they want to buy or invest in something anonymously, and they are advanced to do so, they are likely to abuse cryptocurrencies,” she said during a UN “Special Meeting” on October 28 .