Virtual Assets

 The FATF's focus on virtual assets

 

How do the FATF Standards apply?

     

 

The effective global implementation of these standards by all countries will ensure virtual asset technologies and businesses can continue to grow and innovate in a responsible way, and it will  create a level playing field.  It will prevent criminals or terrorists seeking out and exploiting jurisdictions with weak or no supervision. 

Countries need to: 

Virtual asset service providers need to: 

  • Understand the money laundering and terrorist financing risks the sector faces
  • Licence or register virtual asset service providers
  • Supervise the sector, in the same way it supervises other financial institutions
  • Implement the same preventive measures as financial institutions, including customer due diligence, record keeping and reporting of suspicious transactions
  • Obtain, hold and security transmit originator and beneficiary information when making transfers

 

Where will regulation happen? 

Traditional banks have brick and mortar headquarters and a client base in close proximity of its offices. 

Virtual assets service providers often have a presence and a client base that spans the globe. 

So where do the standards apply, who should regulate them?

Regardless of the location of the server, or where it does business, it is the country that has incorporated the virtual asset service provider as a company, that is its main supervisor. 

 

 

Building a partnership

Regulating virtual assets service providers is challenging for all. National authorities need to develop skills to understand the technology involved, while the virtual asset service providers have to learn about the financial rules that now apply to their sector.

It is up to the sector itself to develop the technology to meet the FATF’s requirements, particularly when it comes to securely collecting and transmitting originator and beneficiary information.

To help governments and the industry itself, the FATF has developed a risk-based approach guidance with significant input from the sector itself. The guidance explains how to understand the risks, how to license and register the sector, and what the sectors needs to do to know who their customers are, store this information securely and detect and report suspicious transactions.

 

The FATF has engaged intensively with the virtual asset service provider sector to build a partnership between governments and the sector and better understand the issues and risks involved, including by hosting annual fintech/regtech forums since 2017.

Through its Contact Group, the FATF continues to further explain the FATF’s requirements to the industry and to monitor developments and understand how the industry is meeting the various challenges.