Firms with an objective to get more involved in virtual assets and tokenisation in 2024 should put in place measures now to defend against money laundering, terrorism financing and proliferation financing, according to a team of regulatory experts at Ogier.
Speaking at Ogier’s recent Trusts Advisory Group event in Jersey hosted by Ogier Regulatory Consulting (ORC), Andy Carpenter, Senior Consultant, highlighted that virtual assets anti-money laundering controls, open-source intelligence and the Financial Action Task Force’s (FATF) Recommendation 16 (the Travel Rule) are all interconnected in the fight against financial crime.
At the event, which was introduced by ORC Director Amanda Reilly, the team also explained that the FATF had published guidance on Enhanced Due Diligence measures that can be taken to mitigate against the potential higher risks associated with virtual assets, stressing that these measures can also be taken by non virtual asset related entities as they will strengthen their existing due diligence systems and controls.
That FATF guidance, the team highlighted, included:
- Corroborate the identity information received from customers, such as a national identity number, with information in third-party databases or other reliable sources
- Potentially trace the customer’s IP address
- Use analysis products, such as blockchain analytics software
- Search the internet for corroborating activity information consistent with the customer’s transaction profile, provided that the data collection is in line with national privacy legislation
Commenting, Andy Carpenter said: “There are a range of things firms need to consider in the context of virtual assets, if they are to adequately protect themselves from facilitating money laundering, terrorism financing and proliferation financing. Especially if firms are increasing their exposure to virtual assets and that is undoubtedly the direction of traffic – it is vital they review their due diligence systems and controls and update them where necessary. The good news is that there are a number of innovative and effective systems and controls that can be put in place to minimise the risk of inadvertently being exploited by nefarious actors and organisations.
“Jersey is seen as an attractive jurisdiction to Virtual Asset Service Providers. We are seeing an increase in the number of firms that are looking to set up offices locally in order to offer tokenized real-world assets to their customers and I’m pleased that we have been able to help some of these firms with their regulatory obligations that include having robust AML controls in place.”
Managing Director of Ogier Regulatory Consulting Tui Iti added: “This is a rapidly evolving sector and I was pleased for our team to be able to share their guidance and latest thinking with the industry – to give them an understanding of the origins of FATF requirements, how these are relevant to virtual assets and the challenges that are being faced regarding the global implementation of the Travel Rule.”
