In June 2019, the Financial Action Task Force (FATF), an intergovernmental body that establishes the international standards to prevent money laundering and terrorist financing, revised global standards for anti-money laundering and counter-terrorism financing requirements on VAs, as well as VA providers. A VA is a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes. A VA service provider (VASP) is a natural or legal person that conducts one or more of the following:
- Exchange between VAs and fiat currencies
- Exchange between one or more forms of VAs
- The transfer of VAs
- Safekeeping or administration of VAs or instruments enabling control over VAs
- Participation in and provision of financial services related to an issuer’s offer or sale of a VA
FATF Recommendation 16 calls for member countries to determine that originating VASPs obtain and hold required originator information and required beneficiary information on VA transfers. They are then to submit the captured information to the beneficiary VASPs, who then obtain and hold required originator information and required beneficiary information on VA transfers to make it available upon request to applicable authorities. This would also apply to financial institutions when sending or receiving VA transfers on behalf of a customer. Financial institutions in the FATF member countries were recommended to implement the new standards by June 2020.
The revision of the FATF Recommendation 16 has affected regulation for regulators in the United States, Financial Crimes Enforcement Network (FinCEN), and Canada, Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). Under the issuance of the FinCEN Guidance FIN-2019-G001, the funds travel rule requires that transmittal of funds of more than $3,000 by a VASP would trigger the information capture requirement. The funds travel rule requires all financial institutions to pass on identifying information of the individuals and institutions associated with the transaction. FINTRAC treats all VASPs as money service businesses and for transactions that are greater than C$1,000 the VASP is required to record the name, address and account details to follow FATF’s guidance.
VASPs located in the United States or Canada will require the cooperation of VASPs globally to comply with the FATF recommendation. Steps will need to be taken to limit the type of VAs that are allowed to be traded, as well as limit who can receive or send VAs on a VASPs platform. Or a global database for VASPs to register their customers may be created so that required information can be sourced for compliance with the funds travel rule. This highly evolving area is going to need the attention of institutions’ AML officers to be up to date on the changing regulatory environment or be in contact with individuals or firms who are actively monitoring those changes.
- International Standards on Combating Money Laundering and the Financing of Terrosim & Proliferation
- Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies
- 2020–21 Departmental Plan
