Analysis of the Fifth Update Report on the Implementation of FATF Standards Regarding Virtual Assets and Virtual Asset Service Providers (VASPs).

By Miguel Cassagne

(Head of Cassagne Consultants in AML/CFT/CPF)

July 17, 2024

Introduction

In the fast-paced contemporary digital universe, virtual assets (VAs) and virtual asset service providers (VASPs) have emerged as fundamental components of the global financial ecosystem. This phenomenon has driven the need for robust regulations to prevent the misuse of these assets in illicit activities. The Financial Action Task Force (FATF), known in Spanish as the Grupo de Acción Financiera Internacional (GAFI), has played a crucial role in creating global standards to combat money laundering, terrorist financing, and the proliferation of weapons of mass destruction (ML/TF/PF). In its fifth update report on the implementation of its standards for VAs and VASPs, FATF evaluates the global compliance with Recommendation 15 (R.15) and its Interpretative Note, revised in 2019.

The cited report, titled "Status of Implementation of FATF Standards on Virtual Assets and VASPs: Fifth 12-Month Follow-Up Report," published in June 2024, offers a comprehensive view of the progress and challenges in adopting anti-money laundering and counter-terrorism and counter-proliferation financing measures in the context of virtual assets. The analysis of this report covers global implementation of R.15, adaptation of the Travel Rule, jurisdictional progress, emerging risks, and developments in the private sector. This article, based on the report, seeks to review what R.15 and the Travel Rule (Travel Rule) mean, to detail the findings of the FATF report on this topic, and to offer a critical and constructive perspective to improve prevention strategies in the crypto space.

Chapter 1: What is the Scope of R.15 and the Travel Rule?

1.1. FATF Recommendation 15: New Technologies and Virtual Assets.

In the world of virtual assets, the need for effective and coherent regulation has become imperative. As cryptocurrencies and other digital assets gain popularity, Virtual Asset Service Providers (VASPs) emerge as crucial actors in this ecosystem. Within the international regulatory framework, FATF's Recommendation 15 and the so-called Travel Rule are fundamental elements to ensure transparency and security in virtual asset transactions.

FATF's Recommendation 15 addresses the emerging risks associated with money laundering, terrorist financing, and the proliferation of weapons of mass destruction that arise from new technologies, especially virtual assets. This recommendation urges countries to identify, evaluate, and understand these risks, ensuring that financial institutions and VASPs implement adequate measures to mitigate them. Its primary objective is to ensure that countries are prepared to face the threats and vulnerabilities that accompany technological evolution and the increasing adoption of virtual assets. Ultimately, the goal of Recommendation 15 is to protect the integrity of the global financial system by implementing effective regulatory frameworks that address the specific risks associated with virtual assets.

According to R.15, the first crucial step countries must take is a comprehensive risk assessment. This process involves identifying and understanding the threats and vulnerabilities associated with virtual assets and related activities. It is essential to analyze how these assets can be used for money laundering and the financing of both terrorism and the proliferation of weapons of mass destruction and determine the areas most susceptible to these risks.

In addition to risk assessment, regulating VASPs is fundamental. Countries must establish a regulatory framework that requires these providers to implement AML/CFT/CPF measures comparable to those imposed on traditional financial institutions.

This includes:

a) the obligation to register and obtain licenses to operate legally;

b) the implementation of AML/CFT/CPF Policies;

c) regular supervision and monitoring of VASPs to ensure compliance with these obligations;

d) the application of the corresponding sanctioning regime in case of non-compliance. Moreover, R.15 mentions that competent authorities must have the capacity to conduct inspections and audits to verify compliance with established standards.

The importance of monitoring virtual asset transactions is also emphasized. VASPs must be rigorously supervised to ensure they implement adequate measures to detect and report suspicious activities. This supervision includes conducting periodic audits and inspections to evaluate the level of compliance with regulatory obligations.

R.15 also delves into the global aspect, indicating that international cooperation is an essential pillar. Given the cross-border nature of virtual assets, countries must closely collaborate, sharing information and coordinating efforts to combat money laundering, terrorist financing, and the proliferation of weapons of mass destruction. This cooperation is crucial for establishing a cohesive and uniform approach in implementing R.15 and the Travel Rule.

To achieve the objectives of Recommendation 15, it is vital for VASPs to implement robust customer due diligence (CDD) measures. This involves verifying customers' identities, assessing the risk associated with each, and collecting information about the nature and purpose of the business relationship. Additionally, VASPs must continuously monitor transactions to identify and report suspicious activities.

Employee education and training on emerging risks and best practices in AML/CFT/CPF is another essential component. This training should cover topics such as identifying suspicious transactions, using advanced technologies to detect illicit activities, and complying with regulatory obligations. The use of advanced technology, such as data analysis systems and artificial intelligence algorithms, is crucial for detecting suspicious activities and mitigating risks.

Ultimately, R.15 is presented as an essential tool for addressing emerging risks associated with virtual assets and new technologies. Therefore, the effective implementation of the actions suggested by R.15 is crucial to meet the objectives of this recommendation and ensure a safe and transparent financial environment in the realm of virtual assets.

1.2. Travel Rule as a Pillar of Virtual Asset Regulation.

Within the global regulatory framework, both FATF's R.15 and the Travel Rule are crucial for ensuring transparency and security in virtual asset transactions. The Travel Rule, established in the context of FATF's R.15, requires that personal information of the originator (the sender) and the beneficiary (the receiver) of a virtual asset transaction accompanies the transaction.

The primary purpose of this rule is to ensure the traceability of virtual asset transfers, which is vital for preventing and detecting illicit activities such as money laundering and terrorist financing.

The Travel Rule has three main objectives:

- First, to ensure transparency in virtual asset transactions by making relevant information about the originator and the beneficiary available to competent authorities.

- Second, to provide the necessary tools to trace transactions and prevent their use in illegal activities.

- Finally, to establish an international standard that facilitates cooperation between jurisdictions, ensuring that transactions can be effectively monitored globally.

To comply with the Travel Rule, VASPs must collect and verify essential information about their customers, including names, addresses, and identification details. This information must accompany the transaction throughout the transfer chain. Transactions must also be continuously monitored to detect suspicious activities, and any suspicious activity must be reported to the relevant authorities (in Argentina, this is the Financial Information Unit - UIF).

The compliance process begins with customer due diligence (CDD). Before executing a transaction, VASPs must verify the customer's identity and assess the purpose and nature of the business relationship. During a transaction, the originator's VASP must transmit the relevant information to the beneficiary's VASP, including the originator's name, the beneficiary's name, and the originator's address. These transactions must then be monitored to detect unusual or suspicious patterns, and any suspicious activity must be reported through a Suspicious Activity Report (SAR) to the competent authority (UIF).

To illustrate how the Travel Rule works in practice, consider two examples:

- In the first case, a cryptocurrency exchange in the United States receives an order to transfer Bitcoin from a customer to a recipient in Europe. The exchange must collect and verify the customer's information, transmit this information along with the transaction to the receiving exchange in Europe, and monitor the transaction to detect any suspicious activity. If anything suspicious is detected, the exchange must file a SAR with the competent authority in the United States (in this case, FinCEN).

- In the second case, a VASP in Argentina facilitates the transfer of Ethereum from a customer to another user in Canada. The provider must verify the sender's identity, collect the relevant information, and ensure that this information accompanies the transaction to the VASP in Canada. Additionally, it must monitor wallet activity to identify potential illicit uses and report any suspicious activity to the UIF in Argentina.

As observed, implementing the Travel Rule presents several challenges. The lack of uniform technical standards can hinder the transmission of information between different VASPs and jurisdictions. Ensuring the security and privacy of personal data during transmission and storage is also crucial. Moreover, differences in regulatory frameworks and compliance levels between countries can create gaps that criminals can exploit.

To overcome these challenges, it is necessary to establish international technical standards that enhance interoperability. The use of advanced encryption technologies and cybersecurity measures can protect personal information during transmission and storage. Strengthening cooperation between regulatory authorities globally is also crucial to ensure a cohesive and uniform approach to implementing the Travel Rule.

Chapter 2: Global Implementation of R.15 and the Travel Rule - Analysis of the FATF Report of June 2024

The global implementation of Recommendation 15 and the Travel Rule, according to the FATF, has been uneven and faces numerous obstacles. The report under review reveals that approximately 75% of the 147 jurisdictions surveyed (35 FATF members and 112 FSRB members) only partially or unsatisfactorily comply with these standards. This data reflects an insignificant improvement since April 2023, highlighting the persistent challenges in adopting and executing these crucial measures.

Indeed, the percentage of partial or unsatisfactory compliance (75% of the total 147 surveyed jurisdictions) is particularly alarming, as it indicates that a significant majority of jurisdictions are not fully adopting the necessary measures to prevent money laundering, terrorist financing, and the proliferation financing of weapons of mass destruction through virtual assets.

The lack of complete compliance means that global efforts to control these crimes are being undermined by regulatory and implementation gaps. The fact that there has only been an insignificant improvement since the previous report (15 months ago) suggests that jurisdictions are not adequately prioritizing these issues, which may be due to a combination of lack of resources, technical knowledge, or political will.

The Travel Rule, which requires VASPs to transmit information about the senders and recipients of each transaction, remains a critical point. In this regard, nearly one-third of the surveyed jurisdictions have not enacted the necessary legislation to implement this rule, creating significant gaps that can be exploited by illicit actors.

Furthermore, the lack of uniformity in the adoption of the Travel Rule not only jeopardizes security but also poses operational challenges for VASPs operating in multiple jurisdictions.

Another key finding of the report is that as of June 2024, one-third of the surveyed jurisdictions (147) have yet to enact the necessary legislation. This figure indicates a serious lack of commitment in a considerable number of jurisdictions.

The Travel Rule is essential for tracking and preventing illicit transactions, and the absence of adequate legislation in these jurisdictions creates blind spots that can be exploited by criminals.

This non-compliance not only affects the effectiveness of AML/CFT/CPF efforts at the local level but also weakens international efforts, given that virtual assets can move quickly across borders without adequate regulation.

It should be noted that the results of the report are of vital importance due to the significant number of jurisdictions covered by the FATF's analysis (147 surveyed jurisdictions). This broad sample includes both developed and developing countries, reflecting a diverse global landscape.

The inclusion of 35 FATF members and 112 FSRB members ensures that the report has a comprehensive view of the different realities and challenges faced by various jurisdictions. However, this diversity also highlights the need for tailored approaches that consider the specific capacities and limitations of each region to ensure effective compliance.

Considering the above, it is essential for jurisdictions to adopt a collaborative and standardized approach to move towards more effective compliance. The variability in the implementation of the Travel Rule not only compromises security but also creates operational challenges for multinational VASPs.

International coordination and the exchange of best practices can facilitate a faster and more effective adoption of these regulations. It is crucial for countries to work together to harmonize their laws and create a coherent regulatory framework that allows for efficient implementation of the Travel Rule.

Additionally, international organizations and technical assistance agencies should prioritize supporting jurisdictions with limited resources to improve their capacity to comply with FATF standards. This can include specialized training, technological infrastructure development, and the provision of financial resources to strengthen regulatory capacities. Only through a joint and coordinated effort can a higher and more consistent level of compliance be achieved worldwide.

Chapter 3: Jurisdictional Progress in Risk Assessment and Supervision.

According to the FATF report, the progress in risk assessment and supervision of VASPs varies significantly between jurisdictions. While some jurisdictions with more developed VA sectors have made notable advances, many others still face fundamental challenges in these aspects. Risk assessment is crucial for identifying and mitigating potential threats, and the lack of robust processes in this area can lead to ineffective supervision.

The disparity in progress reflects differences in the maturity of regulatory systems and the technical capacity of jurisdictions. Jurisdictions with more developed VA sectors tend to have a better understanding of the associated risks and, therefore, implement more effective measures. However, in many other jurisdictions, the lack of resources and technical knowledge remains a significant obstacle. As previously highlighted, this variability jeopardizes the effectiveness of global supervision, as illicit actors can exploit jurisdictions with weaker controls to carry out their activities.

The ability to effectively supervise VASPs largely depends on the resources and capacities available in each jurisdiction. In this regard, the report emphasizes that staff training and the development of advanced technological tools are essential for strengthening supervision. Without these elements, jurisdictions may struggle to maintain effective control over VASPs, which could lead to a greater risk of AML/CFT/CPF.

Another central element of the FATF report focuses on staff training. It indicates that continuous and specialized training of regulatory staff is fundamental to ensure they stay up-to-date with the latest trends and techniques in the field of virtual assets. Without adequate training, regulators may not detect key warning signs or fully understand the complexities of virtual asset transactions. The FATF report underscores that the lack of training is one of the main obstacles to effective supervision, especially in jurisdictions with limited resources.

Regarding the technological tools associated with the crypto world, the report states that advanced technologies, such as artificial intelligence solutions and big data analysis, can significantly enhance regulators' ability to monitor and analyze VA transactions. These tools enable faster and more accurate detection of suspicious activities, facilitating a more timely and effective response. The FATF report emphasizes that investing in technology is crucial to overcoming human limitations and improving the efficiency of supervision.

Strengthening supervision capacities should be a priority for all jurisdictions. Investing in advanced monitoring technologies and continuous training of regulatory staff are necessary steps to ensure effective supervision. Additionally, international cooperation can provide technical support and resources to jurisdictions in need, promoting a more uniform and effective approach. Creating a network of well-trained and equipped supervisors can also significantly enhance the global capacity to prevent AML/CFT/CPF.

Moreover, jurisdictions should consider the possibility of establishing partnerships with the private sector to improve supervision. Financial technology (FinTech) companies and other private entities can offer valuable insights and innovative solutions that can complement regulators' efforts. Promoting a culture of collaboration and open communication between regulators and the private sector can lead to a safer and more regulated environment for virtual assets.

Chapter 4: Implementation of the Travel Rule.

The Travel Rule, a key component in FATF's strategy to prevent ML/TF in the realm of virtual assets, continues to be a significant challenge for many jurisdictions. This rule, which requires VASPs to transmit accurate information about the sender and recipient in each transaction, is, as previously stated, essential to ensure the traceability and transparency of VA transactions. However, as the FATF report from June 2024 shows, implementation has been uneven, and many jurisdictions have yet to adopt the necessary legislation to comply with this requirement.

The lack of adequate implementation of the Travel Rule in many jurisdictions creates significant gaps that can be exploited by illicit actors. The FATF report indicates that almost a third of the surveyed jurisdictions have not yet enacted the necessary legislation, reflecting a lack of commitment or capacity to meet international standards. This regulatory gap puts the integrity of the global financial system at risk and hinders efforts to effectively combat ML/TF/CPF in a coordinated and global manner.

The FATF report also highlights that even in jurisdictions where the Travel Rule has been adopted, practical implementation can be insufficient. Technical and operational challenges, such as interoperability between systems and the accuracy of transmitted data, are significant barriers that must be overcome to ensure effective compliance.

Implementing the Travel Rule is not just a matter of enacting laws but also of developing the technological infrastructure necessary to ensure its compliance. Interoperability between different VASP systems and the accuracy of transmitted data are critical aspects that require attention. The FATF report suggests that the lack of robust technological solutions and resistance to change by some market actors are factors contributing to the inadequate implementation of the Travel Rule.

Resistance to change and lack of resources should not be excuses for inadequate implementation of the Travel Rule. Jurisdictions must recognize the critical importance of this measure and take proactive actions to overcome technical and operational challenges. International collaboration and the exchange of best practices can facilitate quicker and more effective adoption, ensuring that the Travel Rule fulfills its purpose of preventing ML/TF/CPF.

Chapter 5: Emerging Risks in the Use of Virtual Assets.

The FATF report highlights several emerging risks associated with the use of virtual assets for illicit activities. Among the most notable are the use of VAs by criminal entities, including North Korea, to finance illicit activities. These risks pose significant challenges for regulators and require coordinated and effective responses to mitigate their impact.

In this regard, the report emphasizes that the use of virtual assets by state and non-state actors to finance illicit activities is a growing concern. North Korea, in particular, has been identified as an actor using virtual assets to evade international sanctions and finance its nuclear program. This illicit use of VAs represents a significant threat to global security and underscores the need for constant vigilance and a coordinated response from the international community.

The FATF report also highlights that the risks associated with VAs are not limited to state actors. Criminal entities, including terrorist organizations and drug cartels, are also using VAs to launder assets and finance their operations. The cross-border nature and relative anonymity of VA transactions make them an attractive vehicle for these illicit activities.

These entities increasingly use virtual assets to move funds across borders undetected by authorities. The FATF report indicates that the lack of coherent regulations and insufficient oversight in many jurisdictions facilitate such activities. Regulators must remain vigilant to these threats and develop effective strategies to monitor and mitigate the illicit use of VAs by these organizations.

Additionally, the FATF report identifies the growing trend of using advanced anonymity techniques, such as cryptocurrency mixers and privacy coins, which further complicate monitoring and supervision efforts. These technologies allow users to obscure the origin and destination of funds, significantly hindering the identification and tracking of suspicious transactions.

These anonymity tools present a major challenge for regulators, as they can be used to launder funds efficiently and on a large scale. The FATF report suggests that jurisdictions need to develop technical capabilities and specific regulations to address the use of these technologies in money laundering and terrorist financing.

Regulators also need to work closely with the private sector to develop innovative solutions to address the challenges posed by advanced anonymity techniques. Creating public-private partnerships can facilitate information sharing and the implementation of more effective measures to prevent the illicit use of virtual assets.

Chapter 6: Advances in the Private Sector and Public-Private Collaboration.

Despite the challenges, the FATF report highlights some positive developments in the private sector regarding compliance with the Travel Rule and other AML/CFT/CPF measures. The increase in VA transaction volumes using Travel Rule compliance tools is an indication of progress. Technological solutions developed by the private sector play a crucial role in detecting and preventing ML/TF.

In this sense, the increase in the volume of transactions complying with the Travel Rule is a positive sign that VASPs are adopting measures to improve the transparency and traceability of VA transactions. This progress is crucial to ensuring that illicit transactions are effectively identified and stopped. However, much remains to be done to ensure that this compliance is universal and consistent across all jurisdictions. To this end, the report emphasizes the importance of collaboration between the private sector and regulators to ensure that technological solutions are effective and properly implemented. The adoption of common standards and interoperability between different systems are essential aspects for improving the efficiency and effectiveness of compliance measures. This collaboration can facilitate the creation of a regulatory environment that is not only robust but also adaptable to the changing needs of the market.

The FATF report highlights several cases where collaboration has resulted in significant improvements in detecting and preventing ML/TF/CPF. This collaboration should be encouraged and expanded to ensure that best practices are uniformly and efficiently adopted across the sector.

CHAPTER 7: Specific Case of Implementation of R.15 and Travel Rule in Argentina.

Notwithstanding the analysis conducted on the FATF Report regarding the global implementation of R.15 and the Travel Rule, it is pertinent to add to the analysis and highlight the significant progress Argentina has made in implementing R.15 and the Travel Rule in the first semester of 2024.

7.1. Law 27.739 (Official Gazette 15/03/2024).

With the new Law No. 27.739, published in the Official Gazette on March 15, 2024, which was driven by the need to comply with the latest agreement signed by Argentina with the International Monetary Fund (IMF) and included improvement suggestions made by the Financial Action Task Force (FATF)?which are likely to be evaluated by said international organization within the framework of the Fourth Round of Mutual Evaluations that took place in our country in March 2024 and is currently nearing the drafting stage of its report?profound reforms were introduced to the Argentine AML/CFT/CPF system, focused on five major axes, two of which specifically address aspects related to R.15 and the Travel Rule.

In this regard, through new Law 27.739, Article 20 of Law 25.246 (the framework of the Argentine AML/CFT system) was amended to include Virtual Asset Service Providers (VASPs) in the list of Obligated Subjects to report to the Financial Intelligence Unit (FIU), regarding data gathered from their customers within the framework of Due Diligence processes implemented under their AML/CFT policies, and any of their operations that are suspicious of ML/TF.

Indeed, in accordance with the provisions of the new Article 20, paragraph 17 of Law 25.246 (amended by Law 27.739), VASPs became, for the first time, obligated subjects to report to the FIU on AML/CFT matters, fully in line with FATF's R.15 and its interpretative note.

Furthermore, Law 27.739, in addition to incorporating VASPs into the list of obligated subjects to report, established the creation of the Virtual Assets Providers Registry within the scope of the National Securities Commission (CNV), requiring them to register as a prerequisite to operate in the country.

7.2. CNV Resolution No. 994/2024 (Official Gazette 22/03/2024).

Almost immediately, the National Securities Commission, through the issuance of Resolution CNV No. 994/2024, dated Friday, March 22, 2024, marked a milestone by regulating the country's first VASP Registry, created days earlier by Law No. 27.739.

Key aspects of this regulation include: (1.) Mandatory registration in the Registry before commencing operations in the country for individuals and legal entities resident or established in Argentina, as well as foreigners conducting activities related to Virtual Assets (VAs) in the country; (2.) Exception from the registration requirement for VASPs whose operations do not exceed an amount equivalent to 35,000 Units of Purchasing Power (UVA) per month; (3.) Prohibition from operating in the country without registration, in any of the activities covered in the VASP definition under this law and regulation; (4.) Registration obligation also applicable to foreign individuals conducting VASP activities in Argentina, such as using ".ar" domains, receiving funds from Argentine residents, having commercial agreements with local third parties, targeting advertising to Argentine residents, or having a significant volume of operations in the country; (5.) Registration requirements, including the submission of information on identity, domicile, activity, VASP websites, among others, as a sworn declaration; (6.) Criterion that individuals domiciled, established, or residents in jurisdictions considered non-cooperative or high-risk by FATF cannot register; and (7.) Requirement for registered VASPs to include a disclaimer on their websites and social media indicating that their registration in the Registry does not imply licensing or supervision by the CNV over their activity.

7.3. FIU Resolution No. 49/2024 (Official Gazette 25/03/2024).

Furthermore, almost immediately, the Financial Information Unit (FIU) of Argentina proceeded to regulate the new obligated subjects, issuing FIU Resolution No. 49/2024, dated March 25, 2024, which established, for the first time, the regulatory framework on AML/CFT applicable to Virtual Asset Service Providers (VASPs) in Argentina.

This resolution, together with the creation of the VASP Registry within the CNV's jurisdiction and its regulation by CNV Resolution No. 994/2024 on Friday, March 22, 2024, aimed to comply with FATF Recommendation 15 and its interpretative note, in order to secure a positive technical evaluation for Argentina in the ongoing Fourth Round of Mutual Evaluations conducted by FATF in the country.

The new FIU Resolution sets minimum requirements for the identification, assessment, monitoring, and mitigation of risks related to ML, TF, and PADM, based on a Risk-Based Approach for VASPs. Key requirements include: (a.) Obligation to have an AML/CFT system, including the development and updating of AML/CFT/PADM manuals, establishment of annual training programs in the field, setting policies for document retention, KYC policies for customers based on a Risk-Based Approach (RBA), and risk-based monitoring, submission of technical risk self-assessment reports and assessment methodology, evaluation of their preventive system through External Independent Reviewers (EIR), submission of reports on Suspicious Operations of ML, TF, and PADM, Annual Systematic Reports (ASR), and monthly Systematic Reports on "Operations Conducted with Virtual Assets" and "Additions and Removals of Customers." Additionally, it suggests normative policies and advisory alerts as a guide to strengthen AML/CFT systems.

FIU Resolution No. 49/2024 came into effect the day after its publication (from 26/03/2023), establishing specific staggered deadlines for submitting the first Risk Self-Assessment report (by 30/04/26), the first EIR Report (by 31/08/26), the first ASR (between 02/01/25 and 15/03/25), and the first monthly SRVA (between 02/01/25 and 15/02/25).

Finally, the new resolution mandates that VASPs operating in Argentina must register within 30 calendar days of the enactment of this regulation in the UIF's SRO system, in full compliance with UIF Resolution No. 50/2011 (whose requirements were amended by UIF Resolution No. 47/2024).

7.4. Before enactment of Law 27.739 and FIU Resolution No. 49/2024.

Prior to the enactment of the regulations mentioned in the preceding points, FIU had only issued:

(a) FIU Resolution No. 300/2014, which, in addition to defining the concept of "Virtual Currency" (understood as "the digital representation of value that can be digitally traded and performs the functions of serving as a medium of exchange, and/or a unit of account, and/or a store of value, but does not have legal tender status, nor is issued, nor is guaranteed by any country or jurisdiction"), established obligations for Obligated Subjects to: (i) Pay special attention to the emerging risk of operations conducted with such Virtual Currencies; (ii) Establish monitoring mechanisms for these operations, and (iii) Report all operations conducted with Virtual Currencies (Report on Operations Conducted with Virtual Currencies); and

(b) The Communication on Operations with Virtual Assets dated 20/05/2020, through which UIF: (i) Suggested that the increase in operations with Virtual Assets could be linked to Money Laundering and Terrorism Financing activities; (ii) Reiterated the obligations of Obligated Subjects to report and establish enhanced monitoring according to UIF Resolution No. 300/2014; and (iii) Indicated its intention to adapt Argentina's Anti-Money Laundering system to comply with FATF's Recommendation 15.

7.5. Progress in the Implementation and Compliance with the new Argentine regulations on VAs and VASPs.

Finally, it should be noted that in addition to the new regulations incorporated into the Argentine AML/CFT system related to VASPs and VAs, progress has continued regarding the implementation of these regulations.

In this regard, less than a month ago, the CNV reported receiving 85 applications from legal entities and 8 from individuals to register in the Registry of Virtual Asset Service Providers (VASPs), with the former, 35 are already registered and four are of foreign origin.

It also added that after the expiration of the 45-day registration period, the Registry remains open for new applications, although those who register now will have to wait for the registration process to be completed before operating.

On the other hand, regarding UIF's activity, it not only regulated VASPs for the first time but also almost immediately implemented and enabled in the SRO+ System that it manages, the initial registration process in FIU (as obligated subjects) for VASPs registered with the CNV, in compliance with Law 27.739 and UIF Resolution 49/2024.

These actions demonstrate Argentina's strong commitment to aligning with international standards in this area, not only translating R.15 into domestic law but also seeking to operationalize the implementation of this new regulation as quickly as possible. This represents a significant step forward in enhancing transparency and security in the cryptocurrency market in Argentina.

Final Conclusion.

The FATF report on the implementation of Recommendation 15 provides a comprehensive view of the challenges and advancements in regulating virtual assets and VASPs. Despite the progress made (including those we described from Argentina that were not part of the FATF Report), uneven implementation and regulatory gaps remain the main obstacles to the effectiveness of AML/CFT measures globally and locally in the realm of virtual assets. 

The lack of uniform and consistent implementation of the Travel Rule and other FATF standards creates vulnerabilities that can be exploited by illicit actors. In this regard, the FATF report underscores the need for coordinated action and sustained efforts to close these gaps and ensure effective compliance on a global scale. 

Based on the foregoing, I understand that the effective implementation of FATF recommendations requires a holistic approach that considers the specific capabilities and limitations of each jurisdiction, and investment in technology, staff training, and international cooperation as essential components to strengthen regulatory capacities. 

Moreover, cooperation with the private sector can offer innovative and effective solutions to address the challenges of AML/CFT. Only through a joint and coordinated effort can a safe and regulated environment for virtual assets be achieved, thereby protecting the integrity of the global financial system.

Sources of Reference:

GAFILAT ? 40 Recommendations (R.15 and Interpretative Note)

INFOLEG ? Law No. 25.246 / 27.739

UIF ? FIU Resolution No. 49/2024 and others

CNV ? CNV Resolution No. 994/2024

FATF - "Status of Implementation of FATF Standards on Virtual Assets and PSAVs: Fifth 12-Month Follow-Up Report (June 2024)"