The Council of Europe's anti-money laundering body, MONEYVAL, has released today a report on the use of virtual assets and virtual-asset service providers in the laundering of criminal property, financing of terrorism and the evasion of sanctions.
The report contains an updated horizontal review of measures to regulate and supervise the virtual-asset service provider sector to combat financial crime, and identifies risks around specific products, based on information from 25 MONEYVAL jurisdictions. The report, which updates a 2023 first review, has been prepared in the light of the rapid development of crypto and virtual asset technology, and places a special focus on how virtual assets can be used to circumvent targeted financial sanctions.
The report finds that, overall, there has been significant progress in developing regulatory and supervisory frameworks for virtual assets and virtual-asset service providers, as well as in international cooperation to combat financial crimes.
Better enforcement needed
However, challenges remain, including the need to prevent the use of virtual assets to circumvent targeted financial sanctions, a growing concern for MONEYVAL.
Most jurisdictions participating in the review (81%) now require virtual-asset service providers to be licensed or registered, and over 90% have designated supervisory authorities. Nevertheless, enforcement against unlicensed operators remains weak.
In addition, the implementation of the travel rule, contained in the Financial action task force (FATF) recommendation 16, which requires the collection, transmission, and availability of originator and beneficiary information for virtual-asset transfers, remains incomplete, with only 46% of jurisdictions having operationalised it so far.
The report identifies as emerging risks the misuse of virtual assets for sanctions evasion, fraud, proliferation financing and child exploitation. Moreover, data collection remains a challenge in many areas, often leaving jurisdictions without structured insights into cross-border virtual-asset flows.
Further action is still needed to integrate targeted financing sanctions and proliferation financing risks into national assessments, improve the quality of suspicious activity reporting from virtual-asset service providers, and enhance investigatory capabilities across all competent authorities and the private sector. MONEYVAL jurisdictions should also step up their efforts in capacity building and cross-border cooperation, and develop guidance to keep pace with the dynamic virtual-assets sector.
The Committee of experts on the evaluation of anti-money laundering measures and the financing of terrorism (MONEYVAL) is a Council of Europe monitoring body and a Financial action task force-style regional body which assesses compliance with the main international standards to counter money laundering, the financing of terrorism and the financing of proliferation of weapons of mass destruction, as well as the effectiveness of their implementation. It comprises 35 jurisdictions, 32 of which are assessed solely by MONEYVAL.
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