FATF Guidance for a Risk-Based Approach to Virtual Assets (VA) and Virtual Asset Service Providers (VASP)
The FATF Guidance published at the end of June 2019 was intended to reduce regulatory arbitrage across jurisdictions and create a common playing field for the global Fintech industry. It has framed the way for VA/VASPs to become more mainstream and for the ‘good players’ to expand and gain recognition by cleaning up the image and loop holes relating to the industry.
What did the Regulation do?
In essence the FATF guidance obliged member countries to set in place a regulatory framework to cover VAs and VASPs. As such a range of requirements become applicable to Fintech businesses including:
· Registration or licensing: VASPs should be registered or licensed — at a minimum where they were created; or in the jurisdiction where their business is located in cases where they are a natural person, but jurisdictions can also choose to require VASPs to be licensed or registered before conducting business in their jurisdiction or from their jurisdiction.
· Customer Due Diligence: Customer Due Diligence (CDD) procedures must be in place for transactions of USD 1000. A Customer Risk Scoring Methodology must also be implemented to ensure that appropriate controls are enforced in accordance with the Risk Based Approach including Enhanced Due Diligence (EDD) for higher risk customers.
· Suspicious Transaction Reporting: VASPs will need to submit Suspicious Transaction Reports and be able to respond to regulatory requirements such as freezing Proceeds of Crime denominated in VA.
· The Travel Rule: Recommendation 16, is similar to the so called “Travel Rule” in the U.S. It requires VASPs to send originator and beneficiary information to other VASPs or FIs party to transactions over 1000 USD.
· Internal Controls: Internal controls must be in place to consider the effectiveness of the AML/CFT policies and processes and the quality of the risk management. These include appropriate governance arrangements, training, independent review and Risk Assessments
If you think you are impacted or are not sure how to implement the FATF Guidance for your business, please get in touch..
