FATF ISSUES REPORT ON VIRTUAL ASSETS RED FLAGS INDICATORS
Key Highlights
FATF report includes multiple red flags – to name just a few: use of mixers & tumblers and anonymous or private coins; cross-border transport of decentralized, hardware or paper-based wallets; users with DNS or proxies suppressing domain names; links to unregulated exchanges, darknet, stolen wallets and known criminal users; unrelated wallets controlled from the same IP address; using virtual assets ATM in high-risk countries.
FATF Report
On 14th September 2020, the Financial Action Task Force (FATF), based on more than one hundred case studies contributed by jurisdictions since 2017, published a report that included a collection of red flag indicators for money laundering and terrorist financing (ML/TF) developing specifically from the use of Virtual Assets (VA).
The case studies published in the report are used as instructive examples with the specific aim of assisting reporting entities including financial institutions (FIs), designated non-financial businesses and professions (DNFBPs) and other relevant gatekeepers in identifying and reporting potential money laundering and terrorist financing activities and to supplement existing prevention, detection and investigation techniques involving the misuse of Virtual Assets.
The report covers structured transactions, certain transaction patterns, user & transaction anonymity, suspicious senders or recipients, CDD/source of funds and wealth and geographical risks
Conclusion
The indicators discussed in the report are neither exhaustive nor applicable in every situation since they are continuously evolving and must be applied with information obtained from domestic authorities and public sources.
In order to enhance the effectiveness of this report, a risk-based approach with a synchronized and active two-way discussion between the public and private sectors must be practised.
How Can We Help?
We are a team of highly skilled and qualified professionals, specialized expertise as a certified anti-money laundering specialist including a FATF trained legal expert examiner, experience across financial services industry and multiple related fields from reputable jurisdictions.
Our Credentials:
We have successfully assisted:
- two (2) virtual asset applicants in obtaining in-principle approval from the ADGM regulator.
- one (1) virtual asset applicant in obtaining financial services permission from the ADGM regulator.
- three (3) virtual asset applicants in project management to seek to license from the ADGM regulator.
Authorization Support:
Our approach places significant importance on ensuring that our clients fully understand their options and we work closely with applicant firms to ensure their business control environment is clearly explained throughout the application.
We provide the following services in relation to the authorization of a regulated entity:
- Project management including various meetings with client, regulators and stakeholders
- Analysis of the business model and providing compliance advice on the applicable regulatory framework and application process
- Assist in preparing an application for authorization, Regulatory Business Plan, process flow charts, and financial projections
- Assist in drafting policies and procedures aligned with the relevant regulatory obligations and the business operations
- Liaise with appointed counsel and technical service providers in finalizing legal documentation and standard operating procedures
- Assist in preparation for the demo and walkthroughs on various elements of the website/application
Value-Added Services:
- Standalone project management services until operational launch
- Compliance, AML and finance advisory throughout the application process and after licensing
- Nominee for Non-Executive Board members or Board Committee members assisting in strengthening corporate governance and oversight
Authors
Gail Goring
Partner & Head – Regulatory & Compliance Services
Nisha Shah
Senior Manager – Regulatory & Compliance Services
Masha Shmatova
Senior Manager – Regulatory & Compliance Services
Collaborator
Sahil Sud
Compliance Consultant