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The IMF published two papers aimed at assisting countries in their understanding and mitigation of the money laundering (ML), terror financing (TF), and financing of the proliferation of weapons of mass destruction (PF) risks related to virtual assets (VAs). The first paper explains why VAs are vulnerable for misuse for ML/TF/PF purposes and clarifies which assets and service providers should be subject to AML/CFT measures. It discusses the measures that all countries should take, and the type of action necessary in instances of criminal misuse of VA. The second paper focuses on the AML/CFT regulatory and supervisory framework for virtual asset service providers (VASPs), and discusses the necessary AML/CFT measures and provide examples of practical solutions to implement them. https://www.imf.org/en/Publications/fintech-notes/Issues/2021/10/14/Virtual-Assets-and-Anti-Money-Laundering-and-Combating-the-Financing-of-Terrorism-1-463654 https://www.imf.org/en/Publications/fintech-notes/Issues/2021/10/14/Virtual-Assets-and-Anti-Money-Laundering-and-Combating-the-Financing-of-Terrorism-2-463657

The United States Treasury continues to explore its options for terrorism risk sharing with private markets, with terrorism catastrophe bonds once again under discussion at committee level.

Chainalysis claims that terrorist groups' use of crypto-assets has been overstated. Some terrorist organizations do raise, store, and transfer funds using crypto-assets, but according to Chainalysis, terrorism financing is a very small portion of the already very small portion of crypto transaction volume that is illicit. Instead, terrorist organizations will likely continue to use traditional, fiat-based methods such as financial institutions, hawalas, and shell companies as their primary financing vehicles. Also, crypto-assets are not effective solutions to finance terrorism at scale due to blockchain technology's inherent transparency.

Stablecoins such as Facebook's Libra will need to be tightly regulated or they could destabilise the global economy and risk being used for money-laundering and the financing of terrorism, according to a working group consisting of senior officials from the G7 central banks as well as the International Monetary Fund, the Bank for International Settlements and the Financial Stability Board.

The Libra Association has named HSBC Chief Legal Officer Stuart Levey as its first chief executive. He has been at HSBC since 2012 and previously served the U.S. government as Under Secretary of the Treasury for Terrorism and Financial Intelligence under the presidencies of George W. Bush and Barack Obama, and has a background in combating illicit finance.

The head of the People's Bank of China's Digital Currency Research Institute, Mu Changchun, said that "controllable anonymity" remains at the core of China's digital yuan design. That is, privacy will only apply to end users when they transact among themselves while the details of those transactions remain visible to the central bank and regulators. He also has said a "completely anonymous central bank digital currency (CBDC) is not an option" based on international consensus. Any design that doesn't satisfy anti-money laundering, anti-terrorism financing and anti-tax evasion purposes will be simply vetoed. https://news.stcn.com/sd/202103/t20210321_2933464.html

The Financial Action Task Force (FATF) published guidance for applying a risk-based approach to anti-money laundering (AML) and countering the financing of terrorism (CFT) supervision. The guidance is intended to support supervisors in the transition from rules-based supervision to risk-based supervision. Among other things, it provides high-level guidance on risk-based supervision, which explains how supervisors should assess the risks their supervised sectors face and prioritise their activities.

The government of Macau reportedly plans to amend laws to regulate the issuance of a virtual legal tender, and will work with the People's Bank of China (PBOC) to study the feasibility of issuing a digital currency. The aim would be to improve effectiveness in reducing money laundering, tax evasion and terrorism financing.

The Turkish government has added crypto-asset exchanges to the list of firms subject to the country's anti-money laundering and combating the funding of terrorism (AML-CFT) regulations. The regulatory change took immediate effect after the presidential decree-similar to an executive order in the US-was published in the Official Gazette today. https://www.resmigazete.gov.tr/eskiler/2021/05/20210501-5.pdf

International Monetary Fund (IMF) staff concluded that the issuance of the digital currency SOV by the Republic of the Marshall Islands (RMI) as a second legal tender would raise risks to macroeconomic and financial stability as well as financial integrity. The RMI's legal, regulatory, and institutional framework is not yet ready to accommodate the SOV issuance and manage associated risks. SOV issuance could jeopardize the RMI's last USD corresponding banking relationship (CBR). This combined with anti-money laundering and combatting the financing of terrorism (AML/CFT) risks (including those related to the SOV) could disrupt external aid and other important financial flows, resulting in a significant drag on the economy. Hence, the potential cost of the SOV issuance will likely outweigh the expected benefits.

The Bangko Sentral ng Pilipinas (BSP) released new guidelines for the virtual asset service providers (VASPs) operating in the country, imposing many new restrictions and mandating licenses for operations. The new framework aims to curb money laundering and terror financing using digital currencies. The document highlighted that the regulations are in line with the recommendations of the Financial Action Task Force (FATF).

U.S. CFTC, FinCEN, and SEC leaders issued a joint statement to remind persons engaged in activities involving digital assets of their anti-money laundering and countering the financing of terrorism (AML/CFT)obligations under the Bank Secrecy Act (BSA).

FATF published its draft guidance on digital identity Thursday, for governments, regulated entities and other stakeholders to enforce anti-money laundering (AML) and counter financing terrorism (CFT) regulations.

None of us who favor strong encryption is saying that child exploitation isn't a serious crime, or a worldwide problem. We're not saying that about kidnapping, international drug cartels, money laundering, or terrorism. We are saying three things. One, that strong encryption is necessary for personal and national security. Two, that weakening encryption does more harm than good. And three, law enforcement has other avenues for criminal investigation than eavesdropping on communications and stored devices.

This IMF paper concludes that the mere disappearance of physical cash would not imply that monetary policy's bearing on economic dynamics be in any way reduced. Hence, the disappearance of cash cannot be the argument for calling for CBDCs from that perspective. More relevant arguments for digital instead of physical cash include instead the objective to be better able to counteract money laundering and combat the financing of terrorism and tax evasion.

The EU's Fifth Anti-Money Laundering Directive ("5AMLD") will subject certain participants in the crypto-asset sector to regulation for anti-money laundering (AML) and counter-terrorism financing (CTF) compliance purposes. While it most crypto-asset companies will not be ready to comply by 10 January 2020 (the date EU member states are required to bring it into effect), there are lots of tools available that they should consider utilising now so that when they do implement the directive, the process is far quicker and easier.

The Caymans' Ministry of Financial Services kicked off Phase One of its anti-money laundering (AML) and countering the financing of terrorism (CFT) regulatory framework for virtual asset service providers (VASPs). Phase Two, slated to come into force in June 2021, will introduce licensing requirements and prudential supervision for VASPs. https://www.mfs.ky/news/government-commences-framework-for-virtual-asset-service-providers/

A new INTERPOL report has found the billion dollar mobile money industry in Africa is being exploited by organized crime groups - a trend only set to increase as the service is rolled out across the continent. The report presents an overview of the criminal exploitation of mobile money services, including fraud, money laundering, extortion, human trafficking and people smuggling, the illegal wildlife trade and terrorism. A lack of robust identity checks to verify users combined with a need for greater law enforcement resources and training on mobile money-enabled crimes have created a financial system distinctly vulnerable to criminal infiltration.

ASEAN Plus Group has released a comprehensive guide to Asia-Pacific payment services regulations. For each country, it gives an overview of the current state of the domestic payment industry, the regulators in charge of overseeing the sector, the different types of licenses available, the licensing requirements, the state of cryptoassets regulations, intellectual property laws in place, as well as anti-money laundering and counter-terrorism financing (AML/CTF), tech risk, and data privacy requirements, among other key topics.

Correspondent banking continues to represent an important link in the payment chain with a total average daily turnover of €686 billion, according to the Eleventh European Central Bank survey on correspondent banking in euro, 2019. It shows a decrease in the average size of transactions processed compared to the previous 2016 survey. The decrease in the average transaction size is reflected in a 37% increase in the average daily volume and a 22% decrease in the average daily value of transactions. The most frequently cited reasons for the decline in turnover as well as in the number of banks that are using correspondent banking services are increasing regulatory requirements related to anti-money laundering and combating the financing of terrorism (AML/CFT), including know your customer (KYC) procedures.