Paris-based Financial Action task Force (FATF) has raised an alert against the internationally fragmentated crypto regulatory landscape, which, it said is being exploited big time by fraudsters to scam unsuspecting investors. On Thursday, the FATF released a report saying that the regional differences in crypto supervision is making it tough for authorities to keep a check on virtual asset service providers (VASPs).
The report is titled “Understanding and Mitigating the Risks of Offshore Virtual Asset Service Providers (oVASPs).” It noted that offshore exchanges are lagging in complying with the regulations of different countries, allowing threat actors to take advantage of the situation and pollute the sector.
“I urge all countries and the private sector to act on the good practice we have identified – as virtual assets move across borders in seconds, strong compliance, supervision and international cooperation are essential to address these risks,” said Elisa de Anda Madrazo, President, FATF.
The international financial watchdog has called for an activity-based approach to detect and license oVASPs. It said that a strict enforcement of sanctions for AML/CFT non-compliance must be prioritized by countries around the world.
Ways to share intelligence through inter-agency task forces and public-private partnerships is another area of focus that the FATF has highlighted in its report, suggesting tight FIU-to-FIU collaborations.
Source: FATF
The report cited analysis from Nigeria and Indonesia to spotlight how terrorists and money launderers are moving around illicit funds because of opaque corporate structures of VASPs including lack of physical offices in international regions of operations.
“New Zealand’s Virtual Assets Investigation Resource Group (VAIRG) and India’s multi‑agency VA Sub‑Group show how formal mechanisms for cross‑government coordination support knowledge‑sharing, identification of oVASPs, and more coherent supervisory and enforcement strategies,” the report noted.
The FATF has lauded India for its Sahyog portal through which the authorities there are taking down websites linked to suspicious and unregistered foreign crypto exchanges.
The FATF, in a separate report, has also pointed out that 84 percent of illicit crypto transactions have been processed via stablecoins.