FATF: Strengthening the supervision of global virtual assets (IV)

Since June 2019, the main methods of using virtual assets for money laundering and risk of transferring funds include: (1) Using value-added service providers registered or operating in jurisdictions that lack effective supervision, or using multiple value-added service providers. This makes it more difficult for the competent authorities to track transaction clues and buy more time for criminals to transfer the proceeds of crime. (2) Use various tools and methods to increase the anonymity of transactions. Including the registration of Internet domain names through agents, the use of DNS registrars to mask the real owners of domain names, and the use of decentralized exchanges and applications.

In response to the current COVID-19 pandemic, FATF jurisdictions have also discovered an increase in virtual assets transferred and concealed by the U.S. federal government. One jurisdiction reported the use of virtual assets to launder money from the sale of COVID-19 drugs.

(2) The development trend of the virtual asset market structure

Since June 2019, the virtual asset market has gradually focused on the "stable currency" that may be widely used, but too much focus on the "stable currency" market may lead to a substantial increase in the number of anonymous peer-to-peer virtual asset transactions. These transactions are carried out through unmanaged wallets, and the revised "FATF Standard" does not explicitly cover peer-to-peer transactions. Under the revised "FATF Standard", the expansion of the number and value of transactions that are not subject to "anti-money laundering" will bring about major legal regulatory loopholes. Jurisdictions must be forward-looking in this regard.