🔍 What is FATF?

The FATF is an intergovernmental body formed in 1989 by the G7. It sets international standards to combat money laundering and terrorist financing. While not a regulatory body itself, its recommendations are adopted by over 200 jurisdictions.

💡 FATF’s Role in Crypto:

1. Defining Virtual Assets and VASPs

FATF introduced Recommendation 15 (updated in 2019) to address Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs).

VASPs include:

1. Crypto exchanges
2. Wallet providers (custodial)
3. ICO platforms
4. Crypto ATMs

> FATF requires VASPs to be regulated, licensed or registered and subject to AML/CFT (Anti-Money Laundering / Counter-Terrorism Financing) obligations.

2. Imposing AML/CFT Standards, VASPs must:

1. Conduct KYC (Know Your Customer) checks
2. Monitor transactions for suspicious activity
3. Report suspicious transactions to authorities
4. Keep customer records

3. The “Travel Rule” for Crypto

Requires VASPs to share sender and receiver information for transfers over USD/EUR 1,000.

Information includes:

1. Name, wallet address, account number
2. Originator and beneficiary details
3. This aligns crypto compliance with traditional bank wire transfer rules.

4. Risk-Based Approach and Assessments

1. FATF encourages a risk-based approach, allowing countries to tailor regulations based on risk levels.
2. It conducts Mutual Evaluations and “Greylists” countries with weak compliance (e.g., Pakistan, Nigeria in past).
3. Non-compliant countries may face financial isolation from the global financial system.

5. Encouraging Global Coordination

1. FATF pushes for cross-border regulatory consistency.
2. Encourages information sharing between countries and VASPs.
3. Supports technical assistance to developing countries.

🌐 Impact on the Crypto Industry

1. Increased compliance costs for VASPs
2. Privacy concerns due to information sharing rules
3. Limited access in unregulated or non-compliant jurisdictions
4. Global standardization improving legitimacy and trust in crypto

Summary:

1. The FATF sets the global anti-money laundering blueprint for crypto. Its guidelines pressure countries to regulate crypto markets, enforce KYC/AML, and adopt the Travel Rule, significantly shaping how crypto businesses operate worldwide.