The Financial Action Task Force (FATF) recently updated its FATF Recommendations (Recommendations)1 in relation to virtual assets (VAs) and virtual asset service providers (VASPs) by adding an interpretive note.2 This note further explains how the FATF requirements should apply in relation to VAs and VASPs. These updated Recommendations follow an earlier version released in October 2018, which required countries to subject VASPs to effective systems for Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) supervision or monitoring.
The interpretive note, which was added to Requirement 15, clarifies how the FATF requirements apply in relation to VAs, covered VA activities and VASPs, including in the context of:
- Assessing the associated money laundering / terrorist financing risks;
- Licensing or registration;
- Supervision or monitoring;
- Preventive measures such as customer due diligence, recordkeeping and suspicious transaction reporting, among others;
- Sanctions and other enforcement measures; and
- International cooperation.
In addition to the updated Recommendations, the FATF has also published updated Guidance for risk-based approach to VAs and VASPs, intended to help countries understand and develop regulatory and supervisory responses to VA activities and VASPs, as well as help private sector companies understand their AML/CFT obligations when engaging in VA activities.
The Guidance clarifies that VASPs and entities involved in VA activities should apply the preventive measures described in FATF Recommendations 10 to 21. The Guidance also offers clarifications regarding the specific requirements applicable regarding:
- Recommendation 10: Whereby VASPs must conduct customer due diligence for VA occasional transactions above the US$/EUR 1,000 threshold
- Recommendation 16: Obligation to obtain, hold and transmit required originator and beneficiary information, immediately and securely, when conducting VA transfers. The required information includes the:
- Originator’s name (i.e. the sending customer);
- Originator’s account number where such an account is used to process the transaction (e.g., the VA wallet);
- Originator’s physical (geographical) address, national identity number or customer identification number (i.e. not a transaction number) that uniquely identifies the originator to the ordering institution, or date and place of birth;
- Beneficiary’s name; and
- Beneficiary account number where such an account is used to process the transaction (e.g., the VA wallet).
The FATF has expressed that it expects and will monitor its 39 members in implementing the FATF Recommendations for VAs and VASPs, and that it will conduct a 12-month review in June 2020.
1 The FATF Recommendations are internationally recognized standards against money laundering and terrorist financing