A new report past the Fiscal Action Task Forcefulness, or FATF, details a serial of red flags that can help identify illicit activity involving cryptocurrencies. Amidst them are a general set of guidelines involving exchanges in jurisdictions with weaker regulations, where Binance is seemingly singled out for often moving to avert stronger regulatory oversight.

The report, published on Sept. 14, lists a diverseness of cherry flags for spotting money laundering or terrorism financing, grouped by categories. Most reddish flags cited are unremarkably seen in traditional finance every bit well: young or old people suddenly transacting for huge sums of value, or transfers split into many chunks only beneath the reporting threshold, for example.

In the section relating to geographical risk, however, the report conspicuously states that users transacting with exchanges located in jurisdictions with low anti-money laundering regulations are a ruby-red flag.

In a dissever annotation, the report details how a particular commutation moved several times to avert harsher policies:

"Ahead of the implementation of a policy to prohibit VASP operation in Jurisdiction A in Asia in 2022, a VASP (commutation) established in Jurisdiction A transferred its operation to Jurisdiction B in the same region. In 2022, Jurisdiction B stepped up its AML/CFT legal regime on VAs following pregnant hacks of some major VASPs (exchanges). In March 2022, the VASP announced its intentions to relocate its headquarters to Jurisdiction C in Europe (a jurisdiction which had non yet introduced a comprehensive AML/CFT government in relation to VAs and VASPs at the fourth dimension). After in November 2022, Jurisdiction C introduced sure regulations on VASPs, and in February 2022, it confirmed that no authorisation was given to the respective VASP to operate. More recent reports in 2022 indicated that the VASP had already relocated its registration and habitation status to Jurisdiction D in Africa."

The commutation in question is very likely to exist Binance, which started in China and moved to Japan and eventually Malta. Post-obit February 2022 reports from Maltese authorities that the substitution was never licensed in the state, Binance became evasive as to its current jurisdiction. Some placed its electric current registration in the Cayman Islands, though the FATF seems to believe that its true location is in Africa, possibly the Seychelles.

Binance did not immediately reply to Cointelegraph's asking for comment.

The wording of the written report suggests that FATF would consider any transaction with Binance and other exchanges incorporated in countries with "inadequate AML/CTF regulations" equally a potential red flag.

Strict adherence to these rules could mean that fully regulated exchanges would be forced to ban direct transfers to any of these exchanges. Other rules involving mixing and tumbling of funds would too disqualify indirect withdrawals that go through user wallets.

Still, worldwide jurisdictions and exchanges have been tiresome to adopt FATF guidelines, and private interpretations could create loopholes for some types of exchanges.

Technical challenges to their implementation also abound, as blockchain's pseudonymous nature tin make information technology difficult to adhere the user metadata that the FATF Travel Rule requires.

Despite a deadline for this by June, some experts believe that full implementation is all the same years away.