NEW DELHI: The Financial Action Task Force (FATF) is giving a hard push for implementation of the so-called “travel rule” to track all cryptocurrency transactions to prevent misuse by terrorist groups ahead of the “No Money For Terror” meeting to be hosted by India this month.

Ministers, diplomats and counter-terrorism experts from the member states of the Egmont Group are expected to attend the third edition of the “No Money For Terror” meeting to be held in New Delhi during November 18-19. The Egmont Group brings together the financial intelligence units (FIUs) of 166 countries to counter terror financing.

The misuse of virtual assets, especially cryptocurrency, and crowd-funding platforms is set to figure prominently in the upcoming meet, just as it did during the special meeting of the UN Security Council’s Counter-Terrorism Committee (CTC) hosted by India on October 29, people familiar with the matter said. The meeting will also focus on ways to improve the sharing of information and cooperation between financial intelligence units of various countries(FIU), they said.

Though transfers through “hawala” channels continue to be the main form of terrorist financing, FATF has warned about the growing use of virtual assets and the dark web by terror groups. The Paris-based multilateral financial watchdog formulated the first set of standards for virtual assets in 2019 but FATF vice president Elisa de Anda Madrazo recently warned that the implementation is “going far too slowly”.

Out of more than 200 countries that are affiliated with the FATF, only 60 have started to regulate and supervise the virtual assets sector. The “rest of the world doesn’t have regulation” and more than 50% of the countries “have not even started the process”, Madrazo said at the CTC meeting in New Delhi.

“This is very concerning because while standards take time to be implemented, there is a sense of urgency here. Until most countries implement these new rules, it will not be possible to start implementing the travel rule,” she said, referring to the proposal for tracking all cryptocurrency transactions, including detailed information on senders and beneficiaries.

FATF’s “travel rule” requires the private sector, including virtual asset service providers, to obtain and exchange information on senders and beneficiaries along with all transfers, just as is done in the case of wire transfers by banks.

FATF’s third review of the global implementation of its 2019 recommendations for virtual assets, issued in June this year, said countries had made “only limited progress” in introducing the travel rule.

As of March 2022, only 29 out of 98 countries that responded to the FATF “reported having passed Travel Rule legislation”, and just 11 countries had “started enforcement and supervisory measures”.

Madrazo further warned that it is urgent for countries to regulate the virtual assets sector in order to tackle the “risk of becoming a safe haven for online terrorism”.

Though the technological tools exist to take on threats, this “won’t happen if governments don’t invest in this change”, she said.

The people cited above said the “No Money For Terror” meeting, which is being organised by India’s home ministry with the support of the external affairs ministry, will be a useful platform to help fashion a coordinated global response to the misuse of cryptocurrency and virtual assets by terrorists.

The meeting will also focus on technical, legal and regulatory matters related to countering terror financing, the people said. It will also build on the work done during the UN CTC meeting, they added.

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