November 11, 2022

FATF Refutes Crypto Graylisting Speculations

FATF Refutes Crypto Graylisting Speculations
  • Media reports were abuzz this week with news around FATF’s decision to penalize countries that haven’t yet implemented the agency’s proposed guidelines on crypto anti-money laundering (AML) and counter-terrorist financing (CTF).
  • However, it turned out to be a speculation, and nothing more, as a FATF spokesperson denied any changes to how the agency graylists countries or tracks cryptocurrencies.
  • Although global regulatory response towards cryptocurrencies is still evolving, authorities worldwide have started preparing to bring the nascent assets within the regulatory net. 

According to an Al Jazeera report dated November 7th, the global financial watchdog, FATF, is preparing to conduct annual checks. It aims to ensure countries are enforcing the anti-money laundering (AML) and counter-terrorist financing (CTF) rules on virtual asset service providers (VASPs) operating in their jurisdictions.

The Financial Action Task Force (FATF) has no enforcement powers and mostly relies on governments to enforce its recommendations. However, countries that fail to comply risk serious reputational harm, which could halt investment flows and access to the global financial system.

Annual Reviews vs. Evaluations

Using annual reviews over reciprocal evaluations would allow non-compliant countries less time to implement FATF-set standards. This, in turn, will raise the risk of being added to the graylist. 

The "gray" list refers to the list of countries the FATF deems as "Jurisdictions under Increased Monitoring."

This list is different from the FATF's blacklist, which relates to countries with significant strategic weaknesses concerning money laundering, including Iran and North Korea. 

There are currently 23 countries on that list, including Syria, South Sudan, Haiti, and Uganda. 

Crypto hotspots such as the United Arab Emirates (UAE) and the Philippines are also on the FATF's blacklist. Still, according to the global financial watchdog, both countries made high-level policy commitments to working with the global financial watchdog to bolster their AML and CTF regimes.    

FATF's Denial

However, the report was later refuted by the agency. A FATF spokesman told Al Jazeera that the regulatory body's discussions are confidential and do not comment on media speculation. 

He reiterated that the organization has not changed how it tracks virtual assets or adds countries to its graylist. 

Slow Implementation

In April 2022, the global financial watchdog reported that many countries, including those that had implemented VASP licensing regime, were in noncompliance with its standards for AML and CFT.   

Current Outlook on Crypto Regulations

The global regulatory response towards crypto assets varies widely, with some countries adopting the new technology while others strictly or completely limiting its legal uses. But agencies have begun to look closely at cryptocurrencies and how they can fit them into existing financial regulations. 

Overall, the regulatory landscape for cryptocurrencies is still evolving, and it will likely take some time before there is a clear global consensus on how to deal with them. 


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