WALLIS AND FUTUNA: Cryptocurrency and Financial Crime on the Rise
The Rise of Digital Assets Banking
National consumer research in Wallis and Futuna has shown that a staggering 28% of consumers are extremely interested in having digital asset services as part of their banking relationship. This growing demand is forcing traditional financial institutions to either launch their own digital assets business or form partnerships with Virtual Asset Service Providers (VASPs) and payment service providers to meet the needs of their customers.
Regulatory Uncertainty and Compliance Challenges
Despite regulatory uncertainty, financial institutions in Wallis and Futuna must prioritize addressing the key threats, vulnerabilities, and illicit financing risks related to virtual assets. This includes identifying and understanding the potential for VASPs and payments service providers to indirectly expose them to facilitating suspicious transactions.
Collaboration with VASPs: A Compliance Challenge
Partnerships between financial institutions and VASPs can pose significant compliance challenges. For instance, payment service providers that use conventional operating bank accounts to deposit or withdraw fiat funds to facilitate digital asset payment services can inadvertently create indirect money laundering and terrorist financing risks.
FATF Guidance on Virtual Assets
The Financial Action Task Force (FATF) has issued guidance on virtual assets, outlining AML/CFT measures that financial institutions in Wallis and Futuna should apply when partnering with VASPs. The traditional risk-based approach recommended by the FATF provides a framework for cost-effectively adopting these practices.
Due Diligence on VASPs
Financial institutions in Wallis and Futuna must conduct thorough due diligence on potential VASP partners, including:
- Confirming whether the VASP has performed a thorough risk assessment of its AML/CFT program
- Identifying all beneficial owners and their percentage of ownership by foreign individuals and entities located in high-risk jurisdictions
- Understanding the type of digital assets offered and which services are available to customers
- Assessing the VASP’s presence in high-risk countries and the location of its customers
By performing these due diligence measures, financial institutions can increase their likelihood of creating long-lasting business relationships while addressing compliance with evolving regulatory expectations. As the digital assets market continues to grow, Wallis and Futuna-based financial institutions must remain vigilant in meeting customer demand without compromising the integrity of their AML/CFT programs.