Global Money Laundering Threats Emerge as Virtual Assets Gain Popularity
A recent report by the Financial Services Commission (FSC) of the Virgin Islands has highlighted the growing threat of money laundering (ML) globally, with virtual assets playing a significant role in the process. The report found that virtual assets are being used not only to pay for contraband and illicit services but also to disguise the origin of illegal proceeds.
Money Laundering Risks
The report identified compliance deficiencies within financial institutions (FIs) as contributing factors to increasing ML risks. FIs with inadequate anti-money laundering (AML) programs can allow suspicious transactions to occur without adequate screening or reporting.
- Compliance deficiencies within FIs have contributed to increasing ML risks
- Strong adherence to customer due diligence, beneficial ownership, and transaction recordkeeping and reporting requirements has mitigated this risk
Assessment of Money Laundering Risk
The report assessed the overall ML risk to the Virgin Islands as Medium-High, taking into account the impact of ML threats from both domestic and foreign criminality.
- The assessment was based on a comprehensive review of vulnerabilities within each financial sector
- Data used in the current assessment allowed for better analysis and a more accurate assessment of ML risks
Comparison with Previous Assessment
The current assessment shows some degree of consistency with the 2016 National Risk Assessment, despite differences in methodology and rating systems.
Chart 1.1: Comparison of Results between 2016 and 2020 Assessments
| Sector | 2016 Rating | 2020 Rating |
|---|---|---|
| Banking | Medium-High | High |
| Insurance | Low-Medium | Medium-Low |
| Trust and Investment | Medium | Medium-High |
| Insolvency | Low-High | High |
| Legal Services | Med-Lo | Med-Hi |
| Emerging Sectors | Low-High | High |
Jurisdictional Profile
The Virgin Islands is a non-self-governing territory of the United Kingdom, located in the Caribbean. The territory has a population of approximately 32,000 and an economy primarily driven by tourism and financial services.
- Data collected for the years 2015 to 2019 were carried out by the FSC, led by its AML Unit
- Various stakeholders from the government, law enforcement agencies, and regulatory bodies were involved in the report’s findings
Conclusion
The report highlights the growing threat of ML globally, with virtual assets playing a significant role in the process. The need for financial institutions to implement robust AML programs and ensure compliance with international standards is essential to mitigating this risk.
- Regular reviews and updates are necessary to stay ahead of emerging threats and maintain a stable financial system
- The Virgin Islands’ assessment demonstrates the importance of strong regulatory frameworks and effective implementation of AML measures