Businesses urged to mitigate against risks associated with virtual assets

Monday 11 March 2024

If firms want to protect themselves from facilitating money laundering, financing terrorism and proliferation financing, there are a range of things they need to consider in the context of virtual assets.

That's according to Andy Carpenter, Senior Consultant, who recently spoke on the issue at the Trusts Advisory Group event in Jersey, hosted by Ogier Regulatory Consulting.

Several things are interconnected in the fight against financial crime, including virtual assets anti-money laundering controls, open-source intelligence and the Financial Action Task Force's Recommendation 16 (known as ‘the Travel Rule’).

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. They stressed that these measures can also be taken by non-virtual asset related entities. If taken, they will strengthen existing due diligence systems and controls.

That FATF guidance suggested:

• corroborating the identity information received from customers, such as a national identity number, with information in third-party databases or other reliable sources;

• potentially tracing the customer’s IP address;

• using analysis products, such as blockchain analytics software; and

• searching 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.

Pictured: Ogier regulatory experts highlight importance of AML in virtual assets landscape

Mr Carpenter said: “It is vital that firms 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."

Pictured: Andy Carpenter, Senior Consultant, Ogier Regulatory Consulting.