Financial Crime World

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British Virgin Islands Takes Step Towards Compliance with Financial Action Task Force’s Virtual Assets Standards

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The British Virgin Islands (BVI) is set to introduce new legislation aimed at implementing the Financial Action Task Force’s (FATF) standards on virtual assets and virtual asset service providers (VASPs). This move marks a significant step towards ensuring compliance with international anti-money laundering and combating the financing of terrorism (AML/CFT/CPF) regulations.

Two-Step Approach

According to Walkers, a leading international law firm advising on the laws of Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Ireland, and Jersey, the BVI is taking a two-step approach. From December 1, 2022, VASPs must comply with the BVI’s Anti-Money Laundering Regulations (AMLR) and related Anti-Money Laundering and Terrorist Financing Code of Practice (Code). This requires VASPs to have effective systems and controls in place to mitigate the risk of being used for financial crime.

Compliance Obligations

The AMLR and Code impose extensive compliance obligations on VASPs, including:

  • Having a Money Laundering Reporting Officer
  • Appropriate policies and procedures
  • Customer identification and verification
  • Risk rating
  • Sanctions screening
  • Record keeping
  • Staff training
  • Testing
  • Suspicious activity monitoring and reporting

Compliance with the “travel rule” is also required for transactions over a specific threshold.

Virtual Asset Service Providers Act (VASP Act)

The BVI is expected to bring into force its Virtual Asset Service Providers Act (VASP Act) shortly, which will establish a registration regime for VASPs. The Act requires VASPs to register with the Financial Services Commission (FSC), with a six-month “transitional relief” period allowing VASPs to make their application without having to stop their business.

Go-Live Date

While the exact go-live date of the new VASP Act has not been published, it is expected to be in December 2022 or early 2023. The definitions of a VASP and virtual asset services in the draft law are expected to mirror those in the AMLR and Code.

Conclusion

The introduction of these regulations marks an important step towards ensuring the BVI’s compliance with international standards on virtual assets and VASPs. However, businesses operating in this space should seek specialist advice about their specific circumstances to ensure compliance with the new requirements.