The Financial Action Task Force holds its summer plenary meeting Wednesday, covering a gamut of topics around anti-money laundering (AML) and counter-terrorist financing (CTF).

With cryptocurrency now firmly in the global watchdog’s sights, here’s what to expect from the hearing, which will be the first time a FATF plenary will take place virtually. 

It’s been close to two years since FATF said it was including virtual assets within its ambit and a year since the final recommendation was made. During the June 2020 plenary, the FATF will be gauging regulatory and industry progress towards the implementation of its AML Recommendations.

The Travel Rule recommendation, introduced in June 2019 – which requires financial institutions participating in a transaction to exchange relevant beneficiary and originator know-your-customer (KYC) information – will be one of the topics of discussion as the FATF’s 12-month review process reaches its conclusion.

Member states will also have to report back on the measures their jurisdictions have taken to ensure compliance with Recommendations 15 (New Technologies) and 16 (Wire Transfers). Countries will have to demonstrate progress made developing domestic regulatory frameworks to ensure virtual asset service provider (VASP) compliance with the recommendations.

Read more: All Global Crypto Exchanges Must Now Share Customer Data, FATF Rules

“People have been treating this as a sort of deadline,” said Siân Jones, senior partner at XReg Consulting and a former delegate on the FATF Policy Development group. “I think this has been overstated. It is a milestone, but it’s not a hard deadline.”

The 37 FATF member states form a quasi-treaty organization that mutually evaluates progress on digital asset regulation from country to country, and also how the industry has done at creating technical solutions and standards. A number of technical solutions have emerged with some clearly intended to land around the time of the plenary meeting.

"Since the FATF published its guidance last year, out of the 200+ countries that comprise of the FATF’s member jurisdictions, only around 10% of regulators have published frameworks and legislation fully-aligned with the new guidance," said Elsa Madrolle, general manager of International at CoolBitX, a wallet provider that developed the Sygna Bridge solution for the Travel Rule.

Jones said there will likely be an acknowledgement that FATF members such as the U.S., Europe, Switzerland and Singapore have made progress, as has the crypto industry. There may be some notification of areas and jurisdictions where more work is needed – but this all takes place behind closed doors.

In Madrolle's opinion, South Korea, Singapore, Canada, the Cayman Islands, Bermuda, Abu Dhabi and Switzerland deserve to be praised widely for establishing comprehensive regulation around the issuance and use of digital currencies, aligned with FATF requirements.

However, some countries such as Japan or the U.K. have stopped short of implementing specific regulations to encompass the Travel Rule requirement, said Madrolle, while the U.S. has issued regulations encompassing the Travel Rule without enforcing compliance.

In addition, the European General Data Protection Regulation (GDPR) greatly complicates the debate of AML measures versus data privacy. "The two sets of AML guidance issued by FATF and the European Union have yet to be fully aligned, resulting in a patchwork of regulations being devised across the EU with some countries falling behind on timelines," said Madrolle. 

Read more: In Banking First, ING Develops FATF-Friendly Protocol for Tracking Crypto Transfers

The event, which normally takes place over a whole week in Paris and can attract as many as 800 delegates, has been boiled down to three hours on Wednesday

“Virtual assets are an important item and a number of countries will want to speak on it. That might last ten minutes; it might last half an hour,” Jones said. “But as everything has been truncated, I imagine it will just be a matter of ten or 20 minutes on this topic.”

In fact, the hard work has already been done, Jones said, in the form of a report by the FATF Policy Development Group. 

“This report will have been circulated in advance of Wednesday, and there will have been various recommendations,” said Jones. “Countries can take their positions and the business of the plenary will be quite formal.”

The FATF report, once it has been approved by member countries, will be sent on to the G20, which kicked off the process by asking the FATF to look at digital assets back in 2018.

“The report will be published in some form probably a week or two after the plenary meeting,” said Jones. “It’s unlikely to be the full report, I expect there will be some abridged form.”

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In addition to the work done by the permanent Policy Development group, an ad hoc Digital Asset Contact Group was formed to monitor progress and liaise with countries and the private sector.

“I think it’s highly likely the Contact Group will be renewed for another 12 months,” said Jones.

The social distancing imperative could have an effect on outcomes and progress regarding the complex work of digital assets, Jones lamented, because there’s less opportunity to have side meetings over coffee. That may mean fewer ways to address issues or broker compromises.

“All the formal stuff at these big international meetings, in a sense, provides the backdrop for many important encounters between delegates and conversations on the margins, during which they can start to iron out problems,” she said. 

COVID-19 is likely to feature in some of the upcoming Travel Rule discussions as regulators may need more time in light of the current landscape, said Madrolle.

"We should see a trend towards harmonization between AML initiatives such as 5AMLD and FATF, possibly through further explanatory guidance notes from one side or the other," she said. "One of the most complicated issues for FATF to tackle during this plenary remains the 'sunrise' issue, where different regulation is devised and implemented at different times around the world."