Travel Rule and Beneficiary Information Continues to Challenge Virtual Asset Service Providers
In late October, the Financial Action Task Force issued its long-awaited updated guidance on Virtual Assets and Virtual Asset Service Providers (“FATF Guidance”), an extremely lengthy and detailed document setting forth how virtual asset service providers (“VASPs”) and related virtual asset activities fall within the scope of FATF standards for anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”). The FATF Guidance is important to VASPs worldwide, as well as the more traditional financial institutions (“FIs”) doing business with them. Because of its great breadth, we focus here only on its comments regarding implementation of the so-called “Travel Rule” for virtual assets. This portion of the FATF Guidance is particularly relevant to the U.S. because, as we have blogged, the Financial Crimes Enforcement Network (“FinCEN”) proposed regulations in 2020 – still pending – which would change the Travel Rule by lowering the monetary threshold for FIs from $3,000 to $250 for collecting, retaining, and transmitting information related to international funds transfers, and explicitly would make the Travel Rule apply to transfers involving convertible virtual currencies.
The FATF Guidance has additional relevance to U.S. VASPs and FIs because, this month, the U.S. President’s Working Group on Financial Markets (“PWG”), the Federal Deposit Insurance Corporation (“FDIC”), and the Office of the Comptroller (“OCC”) (together, “the U.S. Agencies”) issued a Report on Stablecoins (the “Report”). Stablecoins are digital assets designed to maintain stable value as related to other reference assets, such as the U.S. Dollar. In the Report, the U.S. Agencies delineate perceived risks associated with the increased use of stablecoins and highlight three types of concerns: risks to rules governing AML compliance, risks to market integrity, and general prudential risks. We of course will focus here on the Report’s discussion of AML risks, particularly because it repeatedly invokes the FATF Guidance, thereby illustrating the increasing efforts by governments to seek a global and relatively coordinated approach to addressing AML/CFT concerns regarding virtual assets.
Continue Reading Global Developments in AML and Virtual Assets: FATF Guidance and the Travel Rule, and U.S. Pronouncements on Stablecoins