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BVI Tightens VASP Regulations to Combat Money Laundering and Terrorist Financing
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The British Virgin Islands (BVI) has strengthened its regulations on Virtual Asset Service Providers (VASPs) to align with international standards and combat money laundering and terrorist financing.
New Regulations
As of December 1, 2022, the BVI’s Anti-Money Laundering Regulations, 2020 Revised Edition, and the Anti-Money Laundering and Terrorist Financing Code of Practice, 2020 Revised Edition, have been amended to bring VASPs that carry out transactions involving virtual assets valued at $1,000 or more under their scope.
Guidance and Registration
The BVI Financial Services Commission (FSC) has published guidance on preventing money laundering, terrorist financing, and proliferation financing for VASPs, as well as a guide on applying for registration as a VASP.
Consequences of Non-Compliance
The VASP Act prohibits VASPs from issuing false or misleading advertisements or making false statements about their services. Failure to comply with these regulations can result in fines of up to $75,000 and imprisonment for up to five years.
Regulatory Sandbox
In addition, the FSC has introduced a regulatory sandbox that allows institutional applicants to test innovative fintech business models under close supervision. VASPs can participate in the sandbox, but must still comply with relevant aspects of the VASP Act.
International Standards
The BVI’s VASP regime is expected to be interpreted in line with international standards set by the Financial Action Task Force (FATF). The jurisdiction has also announced plans to amend its Regulatory Code to prohibit the issue of advertisements and brochures relating to virtual assets activities.
Impact on Fintech Sector
Despite the introduction of new regulations, no significant disruptions have been reported in the BVI’s fintech sector. As other jurisdictions develop their own fintech regimes, businesses are seeking to leverage regulatory arbitrage where possible. The BVI is aware of global standards and international market practice, and will likely take into account the outcome of a forthcoming consultation by the International Organization of Securities Commissions on standards for regulating crypto markets.