FATF strengthens fight against financial crime, keeps North Korea and Iran on blacklist

The Financial Action Task Force has agreed to strengthen international cooperation to counter emerging financial crime risks involving virtual assets and decentralized finance, or DeFi. The global watchdog also kept North Korea and Iran on its blacklist of high-risk countries, citing serious deficiencies in their compliance with international standards.

South Korea's Financial Intelligence Unit, which operates under the Financial Services Commission, announced Monday that the decisions were made at the 34th FATF plenary's sixth session, held June 15–19 at the OECD headquarters in Paris. The plenary adopted a range of strategic initiatives, including a report on the implementation of Recommendation 15 — the international standard on virtual assets — as well as a risk analysis report on DeFi and a global overview report on public-private partnerships and data protection frameworks.

FATF assessed that member countries' overall pace of implementing anti-money laundering regulations for virtual assets remains slow. Supervision of virtual asset service providers and application of the travel rule were found to be inadequate in some countries. The travel rule requires exchanges to share the identity information of both senders and recipients when transferring virtual assets — effectively a real-name transfer system for cryptocurrency transactions.

Member countries expressed concern that virtual assets continue to be exploited for large-scale financial fraud and money laundering, and that AI is emerging as a risk factor making such crimes increasingly sophisticated. They agreed that stronger measures to enforce FATF standards are needed.

South Korea and a number of other member countries proposed that the travel rule be applied to both sending and receiving service providers, and that its mandatory scope be extended to cover small-value transactions currently exempt under certain exceptions, given the growing money laundering risks posed by cross-border virtual asset transfers. They also said criminal organizations are increasingly exploiting offshore and unregistered virtual asset service providers, and called for consideration of measures to restrict transactions with high-risk unregistered operators.

Strengthening public-private cooperation was also a key agenda item. FATF said the scale and complexity of fraud are growing as digitalization and cross-border transactions expand, and that broader information sharing between financial institutions and investigative and supervisory authorities is essential. The plenary approved the global overview report on public-private partnerships and data protection frameworks, and launched work on revised guidance for Recommendation 16 to improve transparency in cross-border payments.

FATF also maintained sanctions against countries that have failed to comply with international standards. North Korea and Iran retained their status as "high-risk jurisdictions subject to a call for action," while Myanmar kept its designation as a "high-risk jurisdiction under increased monitoring." North Korea has held high-risk status since 2011 — 16 consecutive years. The plenary said it would strengthen its public statement on Myanmar, citing serious illegal financing risks linked to fraud and cyber scam networks operating in the country.

There were changes to the list of "jurisdictions under increased monitoring" — countries working to address deficiencies in their anti-money laundering regimes. Namibia and Algeria were removed from the list, while Iraq and Bosnia and Herzegovina were added, bringing the total to 22 countries.

The plenary also adopted mutual evaluation reports on the anti-money laundering frameworks of Canada and Turkey, and formally appointed Giles Thomson of the United Kingdom as the new FATF president. Thomson plans to focus over the next two years on strengthening the response to fraud, advancing risk-based approaches and risk-based supervision, and expanding public-private information sharing and cooperation.

Lee Hyeong-ju, head of the FIU, said South Korea has accumulated extensive policy and operational experience combating fraud and money laundering linked to organized scam operations in Southeast Asia, and pledged to actively share that experience to contribute to the organization's work on related priorities.