FinTech Notes

Virtual Assets and Anti-Money Laundering and Combating the Financing of Terrorism (1): Some Legal and Practical Considerations

By Nadine Schwarz, Ke Chen, Kristel Poh, Grace Jackson, Kathleen Kao, Francisca Fernando, Maksym Markevych

October 14, 2021

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Nadine Schwarz, Ke Chen, Kristel Poh, Grace Jackson, Kathleen Kao, Francisca Fernando, and Maksym Markevych. Virtual Assets and Anti-Money Laundering and Combating the Financing of Terrorism (1): Some Legal and Practical Considerations, (USA: International Monetary Fund, 2021) accessed October 16, 2024

Summary

The purpose of this note is to assist countries in their understanding and mitigation of the money laundering (ML), terror financing (TF), and financing of the proliferation of weapons of mass destruction (PF) risks related to virtual assets (VAs). This is the first of two Fintech Notes dedicated to VAs and anti-money laundering and combating the financing of terrorism (AML/CFT). This first note is broad in scope. It explains why VAs are vulnerable for misuse for ML/TF/PF purposes and clarifies which assets and service providers should be subject to AML/CFT measures. It discusses the measures that all countries should take, and the type of action necessary in instances of criminal misuse of VA. A second Fintech note focuses on the AML/CFT regulatory and supervisory framework for virtual asset service providers (VASPs). Both notes are based on Financial Action Task Force (FATF) standards and draw heavily on the FATF’s 2019 “Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers.” They aim at providing policy makers and authorities with AML/CFT responsibilities with an overview of the legal and operational considerations that the implementation of a sound AML/CFT framework for VAs and VASPs raises. In some instances, the notes make reference to specific types of VAs, VASPs, and related products. These references are made for illustrative purposes only, and do not constitute an endorsement of the specific VAs, VASPs, and related products. Finally, at the time of drafting, no country had been assessed against the new standards and many country authorities were in the process of establishing how best to incorporate the new standards in their AML/CFT framework. For these reasons, this note does not refer to specific country examples.

Subject: Anti-money laundering and combating the financing of terrorism (AML/CFT), Blockchain and DLT, Crime, Digital currencies, Economic sectors, Financial crises, Technology, Virtual currencies

Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT), Blockchain and DLT, CFT control, CFT obligation, CFT regulation, CFT supervisor, Digital currencies, FATF definition, FATF standard, Global, Virtual currencies

Publication Details

  • Pages:

    22

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    FinTech Notes No 2021/002

  • Stock No:

    FTNEA2021002

  • ISBN:

    9781513593760

  • ISSN:

    2664-5912