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Banks and institutions cannot be used for AML/CFT to combat virtual assets says Moneyval

By Mark Ford on May 6, 2022

Traditional forms of control that banks and institutions have on financial flows and services cannot be used to combat emerging money laundering and terrorist financing risks related to virtual assets according to the Council of Europe’s anti-money laundering and counter financing of terrorism (AML/CFT) watchdog, Moneyval.

In its annual report for 2021, the permanent monitoring unit also says the effectiveness of European countries’ remains particularly weak in financial sector supervision.

Virtual assets and gatekeepers

Governments need to step up their efforts and coordination to combat money laundering and terrorist financing by adopting stricter regulation and supervision of the virtual assets sector and the specialised “gatekeeper” professions, such as lawyers, accountants and other services providers who often help launderers, Moneyval says in its report.

It adds that the emerging virtual assets sector and the increasing use of cryptocurrencies are becoming a significant challenge to combat money laundering since the traditional forms of control that banks and institutions have on financial flows and services cannot be used and financial products are made available through the internet from anywhere in the world.

Financial supervision unsatisfactory

The report examines the action required to improve the combat against money laundering. It also assesses compliance with international standards and developments in the legal and institutional frameworks to prevent money laundering and terrorist financing in the 34 jurisdictions that were subject to its monitoring as at 31 December 2021.

It finds that the median level of compliance with Financial Action Task Force (FATF) standards is below the satisfactory threshold in the supervision of the financial sector, private sector compliance, transparency of legal persons, convictions for money laundering offences, confiscations of assets, and financial sanctions for terrorism and proliferation of weapons of mass destruction.

Moneyval members demonstrate the best results in the areas of risk assessment, international co-operation and use of financial intelligence the report concludes.

Annual Report 2021 published by the Committee of Experts on the Evaluation of Anti-money Laundering Measures and the Financing of Terrorism (MONEYVAL) can be found here.