Over 200 Jurisdictions Agree on Timely Implementation of FATF Crypto Standards

February 26, 2023 Bitcoin.com

Countries ignoring crypto AML rules risk placement on FATF’s ‘grey list’ — Report

November 8, 2022 Coin Telegraph

Reports suggest the Financial Action Task Force will conduct annual checks to ensure countries are enforcing anti-money laundering rules for crypto providers.

Countries failing to adhere to anti-money laundering (AML) guidelines for cryptocurrencies could find themselves added to the Financial Action Task Force’s (FATF's) “grey list."

According to a Nov. 7 report from Al Jazeera, sources say the global financial watchdog is planning to conduct annual checks to ensure countries are enforcing AML and counter-terrorist financing (CTF) rules on crypto providers.

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

The FATF says countries on this list have committed to resolving "strategic deficiencies" within agreed timeframes and are thus subject to increased monitoring.

It differs from the FATF "blacklist," which refers to countries with "significant strategic deficiencies in relation to money laundering", a list which includes Iran and the Democratic People's Republic of Korea.

At the moment, there are 23 countries on the grey list, including Syria, South Sudan, Haiti and Uganda.

Crypto hotspots like the United Arab Emirates (UAE) and the Philippines are on the grey list as well, but according to FATF, both countries have made a "high-level political commitment” to work with the global financial watchdog to strengthen their AML and CFT regime.

Pakistan was previously also on the list, but after taking 34 actions to solve FATF’s concerns, they are no longer subject to increased monitoring.

One of the anonymous sources cited by Al Jazeera noted that while failure to comply with crypto AML guidelines won’t automatically put a country on the FATF’s grey list, it could affect its overall rating, tipping some to fall into increased monitoring.

Cointelegraph has reached out to the Financial Action Task Force for comment but has not received a response at the time of publication.

In April 2022, the AML watchdog reported that many countries, including those with virtual asset service providers (VASPs), are not in compliance with its standards on Combating the Financing of Terrorism (CFT) and Anti-Money Laundering (AML).

Under FATF guidelines, VASPs operating within certain jurisdictions need to be licensed or registered.

In March, it found that several countries had “strategic deficiencies” in regard to AML and CTF, including the United Arab Emirates, Malta, the Cayman Islands and the Philippines.

In October, Svetlana Martynova, the Countering Financing of Terrorism Coordinator at the United Nations (UN) noted that cash and hawala have been the “predominant methods” of terror financing.

However, Martynova also highlighted that technologies such as cryptocurrencies have been used to “create opportunites for abuse.”

“If they’re excluded from the formal financial system and they want to purchase or invest in something with anonymity, and they’re advanced for that, they’re likely to abuse cryptocurrencies,” she said during a “Special Meeting” of the UN on Oct. 28.

Terrorists are funding their horrible deeds with crypto: UN officials

October 31, 2022 Coin Telegraph

Antonio Guterres

Cash and hawala remain the “predominant methods of terror financing,” according to a UN official, however, "advanced" terror organizations are turning to cryptocurrencies.

Terrorist groups who have been excluded from the “formal financial system” have turned to crypto to fund their heinous activities, according to Svetlana Martynova, the Countering Financing of Terrorism Coordinator at the United Nations (UN).

The UN official made the comments during a speech at a “Special Meeting” run by the UN’s Counter-Terrorism Committee (CTC) in New Delhi and Mumbai on Oct. 28-29 — which was focused on combating the use of “new and emerging technologies” for terrorist purposes.

Martynova said that while cash and "hawala" — a traditional system of transferring money in Arab countries and South Asia — have been the "predominant methods" of terror financing, "we know terrorists adapt to the evolution of conditions around them and as technologies evolve they adapt as well," she said.

Martynova noted that these technologies include cryptocurrencies, which have been used to “create opportunities for abuse,” she said, adding:

“If they’re excluded from the formal financial system and they want to purchase or invest in something with anonymity, and they’re advanced for that, they’re likely to abuse cryptocurrencies.”

UN Secretary-General Antonio Guterres also stated that while emerging technologies have an “unmatched potential to improve human conditions everywhere,” the harm done also expands far beyond that of terror financing:

“Terrorists and others posing hateful ideologies are abusing new and emerging technologies to spread disinformation, foment discord, recruit and radicalize, mobilize resources and execute attacks.”

As for how the UN plans on handling the issue at an international level, Martynova said the main challenge is to get nation-states on board with its regulation.

“We have very clear global standards from the Financial Action Task Force (FATF) and the resolutions of UNSC,” she said.

However, Martynova added that very few countries have started the work on regulation, and even less so are “successfully enforcing that regulation” to deter ill-intended non-state actors.

Some efforts are being made at the state level, with the United States Department of the Treasury most notably sanctioning crypto mixer Tornado Cash over money laundering and cybercrime concerns.

A number of blockchain-based forensic firms such as Chainalysis and Elliptic have also come about in recent years to track down cybercriminals and report their activities to governments — which has helped fade away the myth that cryptocurrency is a criminal’s safe haven.

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Cross-chain bridge RenBridge laundered $540M in hacking proceeds: Elliptic

August 11, 2022 Coin Telegraph

Cross-chain bridge RenBridge laundered 0M in hacking proceeds: Elliptic

blockchain bridges

The blockchain forensics firm said cross-chain bridges provide an "unregulated alternative" to exchanges for transferring value between blockchains.

Cross-chain bridges have been the target of more than a few hacks this year, but new data from blockchain analytics provider Elliptic alleges one has been used to launder over half a billion dollars in ill-gotten crypto assets.

According to an Aug. 10 report, crypto bridge RenBridge has facilitated the laundering of at least $540 million in proceeds of crime since 2020 through a process known as chain hopping — converting one form of cryptocurrency into another and moving it across multiple blockchains.

Elliptic said that decentralized cross-chain bridges provide “an unregulated alternative to exchanges for transferring value between blockchains.”

Rogue states and hacker groups

For the most part, cross-chain bridges or blockchain bridges are used for legitimate purposes, enabling users to move cryptocurrencies seamlessly across blockchain networks.

Users typically deposit their tokens from one chain to the bridge protocol, which is locked into a contract, then the user is issued the equivalent of a parallel token in another chain.

However, Elliptic noted these bridges have also been used by ransomware gangs, exploiters, and hackers to launder proceeds of crime, with RenBridge accounting for at least $540 million of laundered proceeds since 2020.

Most recently, at least $2.4 million in crypto assets stolen during the Nomad hack on Aug 2 went through the cross-chain bridge, according to the firm.

Elliptic also noted that assets from decentralized finance (DeFi) services worth at least $267.2 million have been laundered using RenBridge in the last two years, while a portion of the $80 million stolen from Liquid Global exchange last year, allegedly by North Korea, has passed through RenBridge.

The Conti ransomware group, which famously attacked the Costa Rican government back in June, has also laundered over $53 million through RenBridge so far.

Authorities concerned

Elliptic noted that blockchain bridges such as RenBridge poses a challenge to authorities trying to clamp down on individuals and groups using the emerging technology for illicit activities.

"Blockchain bridges such as RenBridge pose a challenge to regulators since there is no central service provider that facilitates these cross-chain transactions," it said.

In a Jun. 30 status report from the Financial Action Task Force (FATF), the intergovernmental organization highlighted increasing risks associated with "chain hopping," particularly in the DeFi space:

“The rapid growth and evolution of the Defi sector is a cause for concern as it could cause risks to accelerate and proliferate.”

Financial Action Task Force