An international watchdog has urged authorities in Qatar to do more to combat new technology-related money laundering.
Concerns have been raised by a financial watchdog regarding alleged insufficient efforts made by Qatar to address vulnerabilities that could be exploited for illegal activity financing purposes.
The Financial Action Task Force (FATF), based in Paris, has urged the Qatar Central Bank (QCB) to intensify its actions in identifying and penalising virtual asset service providers (VASPs) that violate the ban on cryptocurrencies implemented by the Gulf state in 2019.
“There are shortcomings in the lack of sanctions applied to natural or legal persons carrying out unlicensed VASP activities and how Qatar has applied an adequate risk-based approach to ensure that measures to prevent or mitigate ML/TF are commensurate with the risks identified… These are considered minor deficiencies in light of the overall medium risk ratings and Qatar’s context as it has minimal exposure to VASP activities,” it said.
Qatar banned crypto in 2019, and the report deems Qatar’s response towards new technologies “largely compliant,” giving a few recommendations on implementation.
But, the report largely commends Qatar on steps the country has taken to comply with most anti-money laundering and counter-terrorist financing guidelines. Of the 40 factors considered under technical compliance, Qatar was compliant in 32 and largely compliant in 8.
“Qatar has made substantive improvements to its system to combat money laundering and terrorism financing and its technical compliance with FATF requirements is very strong. However, Qatar needs to make some major improvements, in its criminal justice response to terrorist financing,” the report added.
“The FATF-MENAFATF mutual evaluation of Qatar highlights that the country has a good understanding of the money laundering and terrorist financing risks it faces, but it needs to improve understanding of more complex forms of money laundering and terrorist financing,” it added.
The report claims Qatar has sometimes failed to demonstrate that its authorities are actively identifying and taking enforcement measures against potential breaches of the prohibition on cryptocurrency firms, as announced by the Qatar Financial Center Regulatory Authority in 2019.
The report also highlighted that no formal sanctions had been imposed on individuals or entities for contravening the ban, even in cases where unlicensed VASP providers were allegedly found operating in the country.
Despite the ban on digital assets, Singapore-based crypto exchange Crypto.com was an official sponsor of the 2022 FIFA World Cup. However, attendees could use the BitPay Card, a crypto debit card, to make purchases.
The report also mentioned 2,007 rejected virtual asset transactions and the closure of 43 accounts due to their association with digital assets. However, it stressed that more should be done to combat these issues effectively.
Responding to the report, Qatar Central Bank pointed to the country’s compliance.
“The state of Qatar is compliant or largely compliant with all 40 recommendations … [making] Qatar the first country in the Middle East and North Africa region to achieve such a high level of compliance,” a statement read.
“The outcomes of the assessment … demonstrate the country’s robust commitment to combatting illicit financing, complying with the FATF standards, and contributing as a strategic partner in the international efforts to combat financial crimes,” it read.
With regard to the effectiveness of the combating system, “Qatar obtained four ratings of a substantial level of effectiveness.
“The report indicated that the AML/CFT system in the State of Qatar is particularly effective in the areas of assessing and understanding the risks of money laundering and terrorism financing, risk-based supervision of the financial and non-financial sectors, seizing and confiscating proceeds of crime, implementing targeted financial sanctions related to combating the financing of terrorism, and supervising and monitoring the non-profit sector and protecting it from terrorist financing abuse,” it added.
Globally, policymakers and regulators have expressed concerns about the potential misuse of cryptocurrencies for terrorism financing and money laundering.
Cryptocurrencies like Bitcoin offer a high level of anonymity, making them attractive to criminals and entities targeted by sanctions.
The FATF, established by the G7, can “blacklist” banking systems if it determines that insufficient measures are being taken to combat money laundering and terrorist financing.
Decisions made by the FATF are closely monitored as they impact the perception of a country’s financial system on the global stage.