The Financial Intelligence Centre (FIC) is moving on crypto after publishing the final guidance for crypto asset services providers. This means that these service providers have to report their transactions, which will help to prevent money laundering.
The FIC guidelines list crypto asset services providers as accountable institutions due to the risk that crypto assets can be used to facilitate money laundering and terrorist financing.
According to the FIC, crypto assets are vulnerable to abuse by criminals due to their potential use in cross-border transactions, the fact that crypto owners can use fictitious names and because transactions can occur seamlessly without being in-person.
ALSO READ: Consumers finally have some protection from cryptocurrency bad actors
According to the FIC, someone is deemed a crypto asset service provider based on the economic activities or operations undertaken, rather than the technology, platform or type of crypto asset used for the transaction, says Lerato Lamola-Oguntoye, consultant and Analisa Ndebele, associate at law firm Webber Wentzel.
Some of the guidance includes an interpretation of the terminology used. Someone will be deemed a crypto asset service provider when he or she carries out one or more of the five activities listed below:
ALSO READ: Here’s why it’s not a good idea to hide your crypto gains from Sars
Lamola-Oguntoye and Ndebele say once it is deemed as an accountable institution, a crypto asset service provider must register with the FIC. They add that it is important to maintain a risk-based approach when assessing whether a person qualifies as a service provider.
However, those performing crypto asset activities in their personal capacity are excluded.
The Financial Action Task Force (FATF) published an update on the implementation of the FATF standards on virtual assets and virtual asset service providers (VASPs) in June 2023. Lamola-Oguntoye and Ndebele say its standards require countries to assess and mitigate their risks associated with virtual asset financial activities and providers.
ALSO READ: Reserve Bank to banks: Get with the crypto programme
The FATF started considering virtual assets in 2019 and published its updated guidance in 2021, highlighting these six key areas:
“The FATF assessed the implementation of the 2019 guidance against the 98 jurisdictions under mutual evaluation. Based on the 98 FATF mutual evaluation and follow-up reports conducted, 75% of jurisdictions were found to be only partially or not compliant with the FATF’s requirements.”
They say the FATF stressed that jurisdictions must implement the travel rule, as it found that jurisdictions made insufficient progress on implementing this rule. The FATF Travel Rule requires VASPs to obtain details of the sender and recipient of a virtual asset transfer to counterparty VASPs or financial institutions, either during or prior to the transaction. Effectively, the rule requires VASPS to know who is initiating the transfer and who receives it.
The FATF is encouraging all member countries to rapidly implement its standards on virtual assets and VASPs, including the travel rule.
Download our app and read this and other great stories on the move. Available for Android and iOS.