Virtual Assets and Financial Crime Regulation

Virtual Assets and Financial Crime Regulation
By Jennifer Hanley-Giersch (@integrity_risk)

Virtual assets (aka virtual currencies, crypto currencies, crypto assets) are seen as bringing innovation to the payments-services sector; furthering financial inclusion; and facilitating greater efficiency in cross-border transactions. However, as with other financial products and services, crypto currencies are also exposed to financial crime risks.

There are financial crime risks attached to crypto assets and crypto c urrencies including discussions around Initial Coin Offerings (ICOs), differentiating on how the risk for crypto currencies differs from ICOs.

Beyond analysing the standards and recommendations being made by organisations such as the OECD’s inter-governmental body, Financial Action Taskforce (FATF), we can also look at regional legislation such as the 5th EU Anti-Money Laundering Directive, as well as the upcoming 6th Directive, and its impact on crypto assets.

Also, the FCA’s consideration to bring into scope exchange services between different crypto assets, to prevent anonymous ‘layering’ of funds to mask their origin. Furthermore, decisions by the US OFAC Office to include specific crypto currency addresses associated with blocked persons as identifiers on the Specially Designated Nationals List, in order to strengthen its efforts to combat the illicit use of crypto currency transactions is another example of relevant discussions. In addition, there is the approach of regulatory innovators such as the MAS in Singapore who use a regulatory framework for crypto assets.