The Financial Action Task Force — FATF — holds among its core responsibilities the issuance and updating of the 40 Recommendations. These guidelines are followed by FATF member states and aim to enhance legal and organisational systems for the prevention of money laundering and terrorist financing.
FATF Recommendation 15 focuses on the need to identify and assess the risks of money laundering and terrorist financing that may arise from:
- the development of new financial products or business practices,
- and the use of new technologies, as well as emerging technologies, for both existing business practices and new financial vehicles.
Therefore, the objective of FATF Recommendation 15 is that states and financial institutions take the necessary measures when developing new business practices or employing new technologies.
Additionally, Recommendation 15 places special emphasis on virtual asset service providers, noting that they must be registered and authorised, and subject to monitoring to ensure compliance with the FATF Recommendations.
The FATF defines a virtual asset as “a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes.” It also defines virtual asset service providers as natural or legal persons who exchange, transfer, safeguard, or manage virtual assets, or provide financial services related to their issuance or sale.
The FATF expanded Recommendation 15 through an interpretive note adopted in June 2019, aimed at developing the key principles that should guide the authorisation, registration, and monitoring of virtual asset service providers.
Firstly, the note establishes that virtual asset service providers must be authorised and registered at least in the jurisdiction where they were created, as well as in those where they have clients. Competent authorities must ensure that persons who control such providers are not criminals or associated with criminal activity. Likewise, they must pursue providers operating without proper authorisation or registration.
The purpose of this authorisation, registration, and monitoring process is to ensure that virtual asset service providers are fully subject to anti-money laundering and counter-terrorist financing regulations. These providers must be supervised by a competent authority conducting ongoing monitoring of their compliance measures.
Are you interested in learning more about the 40 FATF Recommendations? Discover our series of articles where we explain each of them and their significance.
- Recommendation 1: Risk assessment and application of a risk-based approach.
- Recommendation 2: National cooperation and coordination.
- Recommendation 3: Money laundering offense.
- Recommendation 4: Confiscation and provisional measures.
- Recommendation 5: Terrorist financing offense.
- Recommendation 6: Targeted financial sanctions related to terrorism and terrorist financing.
- Recommendation 7: Targeted financial sanctions related to the proliferation of weapons of mass destruction.
- Recommendation 8: Non-profit organizations.
- Recommendation 9: Banking secrecy.
- Recommendation 10: Customer due diligence.
- Recommendation 11: Record-keeping.
- Recommendation 12: Politically Exposed Persons.
- Recommendation 13: Correspondent banking.
- Recommendation 14: Money or value transfer services.
- Recommendation 15: New technologies
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