The Financial Action Task Force ("FATF"), which is responsible for setting international standards in combating money laundering and terrorist financing ("AML/CFT"), published on 7 July 2020 two new reports on virtual assets. These two publications mark an important milestone in raising awareness among jurisdictions and stakeholders on the specific AML/CFT risks in virtual assets and the providers of services related to such assets. They also announce new work stages for the FATF by June 2021.
In October 2018, the FATF updated its Recommendations by explicitly targeting those providing services related to "virtual assets". In June 2019, they were usefully supplemented by an interpretative note and a guide specifying the manner in which these new recommendations were to be implemented by member jurisdictions.
The FATF draws up an initial assessment
The merits of the FATF Recommendations and their implementation by its member jurisdictions are subject to assessments, the findings and related recommendations of which are publicly reported. The first report published on 7 July 2020 falls precisely within this framework. One year after the publication of this interpretative note, the FATF shares the results of its analysis regarding the implementation of the new recommendations by the jurisdictions and the private sector.
While it highlights that it will monitor all changes in virtual asset types in a quickly evolving market, the FATF notes that most public and private sector players have made progress in implementing the new recommendations. It should be noted in this regard that this assessment for the public sector is based on a self-assessment by jurisdiction.
To date, the FATF has not identified any fundamental issues that would require further amendments to the recommendations. However, the FATF has indicated that, on the whole, the jurisdictions are requesting more information on how to implement certain recommendations, in particular as regards the travel rule. With regard to this sore point, the FATF emphasises that technological solutions have been developed to meet the challenges of its implementation. While the FATF recognises that these solutions do not always make it possible to answer the practical issues raised by the travel rule, it nevertheless insists on the need to comply with this provision.
The FATF looks into the specific case of stablecoins
In its second report published on 7 July 2020, the FATF focuses more specifically on stablecoins, a type of virtual asset whose purpose is to make a payment or an exchange and whose objective is to achieve a relatively stable value.
Here again, the context is particularly rough, since this report comes a few months after the European Commission and the European Council issued a joint statement on the subject and the Financial Stability Committee ("FSC") has started working on global stablecoins. One of the issues under discussion is the legal classification of this type of asset, which can be considered as digital assets, electronic currency or financial instruments.
In the end, the issue is of little importance to the FATF, which considers that these assets do indeed fall within the scope of its recommendations. Indeed, the FATF report considers that these stablecoins share many of the potential AML/CFT risks already identified for virtual assets because of their potential anonymity and the scale at which they could be exchanged. Depending on the way in which the stablecoins are structured, the entities subject to AML/CFT may thus vary.
Although the FATF does not consider it necessary for its new recommendations to be amended at this stage to take into account this new type of asset, it nonetheless recognises that their development needs to be closely monitored, particularly if they are to be adopted more widely.
The next steps
In these two reports, the FATF clarifies that, at this stage, there was no need to make any further changes to its recommendations. However, the FATF is planning a further compliance review by June 2021. It also announces the publication of new guidelines to clarify the conditions for implementing the existing texts. Specific details will be provided on the subject of stablecoins and, in particular, on the way in which the AML/CFT obligations should be dealt with in relation to them.
These reports, and the further work that they announce, are thus crucial in the light of the work currently being carried out by the European Commission on the introduction of a regulatory framework for crypto-assets and the revision of existing European texts on AML/CFT.
They should also be read in the light of the review of the French system scheduled for autumn 2020, during which the FATF will examine the compliance of the French legal framework with the new FATF recommendations on virtual assets. They could thus have a direct influence on the report that the French Government is due to submit to Parliament by the end of the year on the need to reform the current framework on AML/CFT applicable to providers of services on digital assets (Article 86 of France's Loi Pacte No. 2019-486 of 22 May 2019).
 FATF, 12-Month review of the revised FATF standards on virtual assets and virtual asset service providers, June 2020 : https://www.fatf-gafi.org/publications/fatfrecommendations/documents/12-month-review-virtual-assets-vasps.html; FATF, Report to the G20 Finance Ministers and Central Bank Governors, June 2020 : https://www.fatf-gafi.org/media/fatf/documents/recommendations/Virtual-Assets-FATF-Report-G20-So-Called-Stablecoins.pdf..
 "FATF Recommandations ", updated in June 2019.
 Guidance for a risk-based approach to virtual assets and virtual asset service providers, June 2019.
 In virtual asset transfers, the originator service provider and the beneficiary service provider must both have accurate information on the originator and the beneficiary of the asset transfer.
 European Commission and European Council, Joint statement by the Council and the Commission on "stablecoins", 5 December 2019.
 CSF, Addressing the regulatory, supervisory and oversight challenges raised by “global stablecoin” arrangements: Consultative document, April 2020; CSF, Regulatory issues on stablecoins, October 2019.
 See in particular: European Commission, Communication from the Commission on an Action Plan for a comprehensive Union policy on preventing money laundering and terrorist financing, 7 May 2020; European Commission, Public consultation on an action plan for a comprehensive Union policy on preventing money laundering and terrorist financing, 7 May 2020; European Commission, Towards a new comprehensive approach to preventing and combating money laundering and terrorism financing, 12 February 2020.