On July 3, 2019, the Financial Action Task Force (FATF) published an updated version (dated June 2019) of its anti-money laundering (AML) and counter-terrorist financing (CTF) standards.
This version includes the recently adopted interpretative note to Recommendation 15 (new technologies), in which the FATF explains how its standards apply to virtual asset activities and virtual asset service providers (VASPs). Recommendation 15 defines a VASP as any natural or legal person who is not covered elsewhere under the recommendations and who as a business conducts one or more of the following activities or operations for or on behalf of another natural or legal person:
- Exchange between virtual assets and fiat currencies
- Exchange between one or more forms of virtual assets
- Transfer of virtual assets
- Safekeeping or administration of virtual assets or instruments enabling control over virtual assets or
- Participation in and provision of financial services related to an issuer's offer, or sale of a virtual asset, or both.
Among other things, in the interpretative note the FATF explains that countries should:
- Identify, assess and understand the money laundering and terrorist financing risks emerging from virtual asset activities, and the activities or operations of VASPs. Based on the assessment, countries should apply a risk-based approach to ensure that measures to prevent or mitigate money laundering and terrorist financing are commensurate with the identified risks.
- Require VASPs to identify, assess and take effective action to mitigate their money laundering and terrorist financing risks. VASPs should also be required to be licensed or registered, as a minimum in the jurisdiction in which they are established, or (if a natural person) where their place of business is located. Legal or regulatory measures should be taken to prevent criminals and their associates from controlling, being beneficial owners of, or holding management functions in a VASP.
- Ensure that VASPs are subject to adequate AML and CTF regulation and risk-based supervision and monitoring by a competent authority. Competent authorities should have adequate powers to supervise and monitor, and to impose a range of disciplinary and financial sanctions that are effective, proportionate and dissuasive (whether criminal, civil or administrative). Sanctions should be applicable not just to VASPs, but also to their directors and senior managers.
- Rapidly, constructively and effectively provide the widest possible range of international co-operation on money laundering, predicate offences and terrorist financing relating to virtual assets. In particular, VASP supervisors should exchange information promptly and constructively with their foreign counterparts, regardless of the supervisors' nature or status, or differences in the nomenclature or status of VASPs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.