In October 2021, the Financial Action Task Force (FATF) updated the 2019 Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers (VASPs) which addresses cryptocurrency and virtual assets.  

As the virtual asset landscape is changing and evolving rapidly, the 2021 updated Guidance urges virtual asset service providers (VASPs) to be compliant with anti-money laundering (AML) regulations and how to effectively implement the Travel Rule realistically. The 2021 Guidance is part of the FATF’s ongoing monitoring of VA and VASP sector, and it has six key focus areas. 

1. Refines the definitions of VA and VASP

The Guidance elucidated that “central bank digital currencies are not considered to be VAs”.  Despite the different business models of VASPs, all are to be “treated on an equal footing from a regulatory and supervisory perspective”. It provides more information about each component of VASP.

2. Explanation of the concept of stablecoins and P2P transactions

The Guidance emphasises the importance of identifying and assessing the money laundering (ML) and terrorist financing (TF) risks associated with stablecoins. It also addresses risks related to peer-to-peer (P2P) transactions. The Guidance further shares about what are the red flags to identify and available tools for countries to mitigate such risks. 

3. Updates on licensing and registration of VASPs

The Guidance clarifies the procedures regarding the licensing and registration of VASP. In addition, the Guidance clarifies the definition of transaction fees and how the Travel Rule will apply to certain transactions which have automatic refunds.

4. Updated guidance on FATF Standards for VASPs 

In this section, the Guidance addresses the applications of the FATF Standards to VASPs and other institutions which conduct any related VA activities. Furthermore, FATF has stated in this Guidance on how VASPs can become compliant for transactions from unhosted wallets and with the Travel Rule in a more efficient manner. 

5. New and updated country case studies of risk-based approach to VAs/VASPs

6. Discussion about FATF principles of information-sharing and cooperation amongst VASP supervisors.

In recent times, FATF recognised that countries and private sectors are looking for more guidance from FATF regarding how to keep up with the fast-moving dynamics of the VA sector. Hence, in the 2021 updated guidance, they have provided more clarifications regarding the policies, alternative procedures, and case studies which people can reference to. 

At Regtank, we are committed to helping firms remain compliant with the latest regulatory laws, as well as keeping up the fight against ML/FT activities. Find out more about how our compliance suite can help your organisation remain compliant with the latest guidance and regulations from FATF and authorities.

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