According to a recent report by the FATF, more than half of all UN member countries have still not implemented the Travel Rule. As of June 2023, as reported by the FATF, more than half of the UN member countries have failed to enforce the Travel Rule. According to the Financial Action Task Force, the rule is necessary in order to close a loophole in crypto assets that might be exploited by money launderers and those funding terrorism. According to an article in the Business Times Online, the Travel Rule is recommendation #16 of the Financial Action Task Force (FATF) which lays down that all crypto companies must “screen, record and communicate the information of all users of their platform”. This would have the effect of destroying any anonymity for crypto users, with the exception of those who are transacting in amounts less than $1,000. What is the FATF? The FATF is a 39-member body that gives financial recommendations to all UN nations. Given that it is an unelected body, financial decisions in each country are the responsibility of that country and the recommendations can be implemented or not by each country. However, should any country choose not to implement all of the recommendations then it comes under “increased monitoring” of its financial activities. AML and terrorist financing According to the FATF, at the heart of all the recommendations are a desire to root out any money laundering or terrorist financing that might be taking place in a country’s financial system. This purportedly gives it the right and full authority to investigate how money is dealt with everywhere in the world. The FATF is of the opinion that crypto assets can be used for the aforementioned illegal activities and therefore wants all countries to enforce the Travel Rule in order to negate any of these activities. Many jurisdictions ignore recommendations The fact that nearly three quarters of jurisdictions across the world have complied only partially or not at all with the FATF recommendations perhaps says much for a feeling that this non-elected agency is maybe interfering too much in the financial affairs of sovereign countries. Also, given that the FATF is closely associated with the IMF and the World Bank, it might be seen as having a more ‘Western’ bias that may not be as acceptable to certain jurisdictions across the world. Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
