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FATF’s Plenary wraps up: here’s what you need to know

Alice Nawfal
Alice Nawfal
March 2, 2023
Alice Nawfal, with a rich background in blockchain, public policy, and consulting, leverages her extensive experience in business operations and analytics to drive Notabene's growth and operational efficiency.

The Financial Action Task Force (FATF)'s decision-making body, the FATF Plenary, meets thrice annually in October, February, and June. During these sessions, the Plenary considers mutual evaluation reports, policy and governance matters and produces Plenary updates to close loopholes, set forth strategic initiatives, and finalize work in several crucial areas. On February 24, 2023, FATF concluded a second plenary, comprising delegates from over 200 jurisdictions of the Global Network at the FATF headquarters in Paris. 

Notabene welcomes the output from FATF's Plenary in Paris last week, where 206 jurisdictions agreed on an action plan to drive timely implementation of global crypto rules, with a particular focus on the Travel Rule:

  • FATF notes that "many countries have failed to implement these revised requirements, including the travel rule which requires obtaining, holding and transmitting originator and beneficiary information relating to virtual assets transactions."
  • FATF members agreed on a roadmap to strengthen the implementation of FATF standards on virtual assets and virtual asset service providers.
  • Strong crypto regulation can drive down ransomware revenue and criminal activity using virtual assets.

At Notabene, we are thrilled to see regulators taking action to level the playing field, and tackle challenges VASPs encounter with the roll-out. With this action plan, we hope that FATF members will enforce a similar implementation timeline and attempt to unify the travel rule requirements across jurisdictions. In our State of Crypto Travel Rule Compliance Report (published Jan 2022), 52% of companies cited sunrise issues and regulatory clarity as their primary obstacles to compliance.

(Source: Notabene's State of Crypto Travel Rule Compliance Report 2022, page 20)

We applaud the many VASPs who have already taken action to start complying. In 2022 alone, we have onboarded 200+ VASPs to our Sunrise Plan and helped 50+ VASPs go live with the Travel Rule. 

But challenges remain. And we, as an industry, cannot afford to sit on the sidelines. If we want to make new regulatory requirements like the travel rule work for us while preserving privacy of end users, it is imperative that we collaborate on open standards and scalable data transmitting. We need to collaborate ASAP on a unified approach around privacy and security standards and VASP identification. These efforts must be future-proof to create a welcoming and safe environment for the current and next generation of crypto users.

Reducing illicit transactions and improving end-user safety are the driving forces behind this global regulatory shift. Making safe, compliant crypto transactions a part of the everyday economy is Notabene's fundamental purpose. By making Travel Rule compliance more manageable and scalable for companies worldwide, we're taking a significant stride towards achieving this future.

Below, we dive into the key Travel Rule-related takeaways from the FATF Plenary conclusion.

5 key Travel Rule takeaways from the FATF Plenary

1. The FATF Plenary suspended the membership of the Russian Federation

The Russian invasion of Ukraine prompted the FATF to suspend the Russian Federation's FATF membership and advises all jurisdictions to be vigilant to current and emerging risks from the circumvention of measures taken against the Russian Federation to protect the international financial system.

2. FATF agreed on revisions to Recommendation 25 on transparency and beneficial ownership of legal arrangements.

Delegates also agreed on new guidance, which will be published on March 23, 2023, which will help countries and the private sector implement FATF's strengthened requirements on Recommendation 24 on transparency and beneficial ownership of legal persons.

3. Delegates agreed on an action plan to drive timely global implementation of FATF standards relating to VAs, including the transmission of originator and beneficiary information. 

Plenary attendees agreed upon a roadmap to strengthening the implementation of FATF Standards on virtual assets and virtual asset service providers (VASPs) during the Plenary. This will involve assessing the current level of implementation across the global network. By the first half of 2024, the FATF will report on the actions taken by its members and FSRB countries with significant virtual asset activity to regulate and supervise VASPs.

4. The FATF will publish a series of reports that explores risk indicators for ransomware in 2023

  • Disrupting Ransomware Financial Flows

To effectively combat the laundering of ransomware payments, authorities in each country must enhance and utilize existing international cooperation mechanisms. FATF's upcoming report in March 2023 will feature a list of risk indicators that can aid public and private entities in detecting suspicious ransomware-related activities.

  • Money Laundering and Terrorist Financing in the Art and Antiquities Market 

This report provides risk indicators for identifying suspicious activities and good practices countries have implemented, such as specialized units and cooperation with experts to identify and repatriate cultural objects involved in money laundering or terrorist financing.

  • Mutual evaluations of Indonesia and Qatar

The FATF praised Indonesia's robust legal framework and technical compliance but advised improving risk-based supervision of non-financial businesses and using effective sanctions for non-compliance. Qatar has improved its AML/CFT regime but needs to enhance beneficial ownership information access and targeted financial sanctions. FATF will release its reports on Indonesia and Qatar in May 2023.

Additionally, the Plenary agreed to undertake new projects on money laundering and terrorist financing related to cyber-enabled fraud and on the use of crowdfunding for terrorist funding.

5. The FATF has updated the countries on their monitoring lists 

During the Plenary, the FATF added South Africa and Nigeria to the increased monitoring, or grey list, and removed Morocco and Cambodia.

 The following jurisdictions are subject to increased monitoring as of February 2023:

  • Albania
  • Barbados
  • Burkina Faso
  • The Cayman Islands
  • The Democratic Republic of the Congo
  • Gibraltar
  • Haiti
  • Jamaica
  • Jordan
  • Mali
  • Mozambique
  • Nigeria
  • Panama  
  • The Philippines
  • Senegal
  • South Africa
  • South Sudan
  • Syria
  • Tanzania
  • Turkey
  • Uganda
  • The United Arab Emirates
  • Yemen

FATF's blacklist:

  • Iran
  • Myanmar
  • North Korea