Banking & Fintech / 29.08.2022

FATF recommendation regarding Virtual Assets Service Providers & Trusts

The holiday season has not slowed down work in the Financial Action Task Force (FATF), which is conducting a review of Recommendation 25 on the transparency and beneficial ownership of legal arrangements, and issued a targeted update on the implementation of the FATF standards on virtual assets and virtual asset service providers. The deadline to provide comment on recommendation 25 falls on August 1, 2022.

White Paper for Public Consultation regarding recommendation no 25

The FATF’s objective is to improve its recommendation no 25 and its interpretive note to better meet its stated objective to prevent the misuse of legal arrangements for money laundering or terrorist financing. FATF highlights that the work in this area would benefit most from stakeholders, including trustees, financial institutions, designated non-financial businesses and professions (DNFBPs), and non-profit organisations’ comments.

FATF is considering ways to ensure easier access to information on beneficial owners regarding legal arrangements. One of the ideas is to introduce mechanisms that would gather information from e.g. public authority or body holding information on the beneficial ownership of trusts or similar legal arrangements, asset registries agents or service providers including trust and company service providers, investment advisors or managers, accountants, or lawyers.

The main questions FATF seeks the answers to are:

What are the potential issues/challenges for the private sector regarding the implementation of the recommendation no 25 requirements?
Are there challenges in obtaining information regarding beneficial ownership information of legal arrangements when the trustee (or equivalent) resides in another jurisdiction or when the legal arrangement is administered abroad?
What are the areas in particular where the private sector would benefit from guidance regarding the implementation of recommendation no 25, including the suggested revisions described above?

The deadline to provide comment falls on August 1^st, 2022. More information on submitting the answer is available under the link below:

http://www.fatf-gafi.org/publications/fatfrecommendations/documents/r25-public-consultation.html

FATF Standards on Virtual Assets (VA) / Virtual Asset Service Providers (VASPs)

Update conducted by FATF in June 2022 highlighted the need for many countries to strengthen their understanding of ML/TF risks of the VA and VASP sector, and to rapidly implement FATF’s recommendation no 15 to mitigate such risks. FATF indicates that there are now technological solutions available to facilitate Travel Rule compliance in practice, but the private sector needs to continue to increase interoperability between solutions and across jurisdictions and to work towards full compliance.

The update aims to help those private sector entities seeking to engage in VA activities or operations to better understand their AML/CFT obligations and how they can effectively comply with the FATF requirements. It provides guidelines to countries, competent authorities, and industry for the design and implementation of a risk-based AML/CFT regulatory and supervisory framework for VA activities and VASPs, including the application of preventive measures such as customer due diligence, record-keeping, and suspicious transaction reporting.

FATF’s next steps include:

urging members, and the community to accelerate compliance with FATF’s recommendation no 15, with a priority focus on assessing ML/TF risks of VA and VASPs by passing relevant laws and effective enforcement (introducing travel rule where it is not yet functioning; sharing by the authorities experiences and good practices in the field of VA),
advocating to facilitate interoperability across Travel Rule technological solutions, and ensure flexibility to accommodate for nuances in domestic requirements.