Global Regulatory Body FATF updated Crypto asset guidelines


The Financial Action Task Force (FATF) has released updated guidance for firms handling cryptocurrencies and digital assets as part of its anti-money laundering (AML) efforts.
Countries must identify and minimize the risks related to
virtual asset financial activities to comply with FATF guidelines. They also
require licenses and registrations of virtual asset providers and monitoring of
such providers.
FATF measures apply to VASPs the same as they do to
financial institutions. VASPs and countries will be helped by this guidance to
improve their understanding of their anti-money laundering and
counter-terrorism financing obligations and to implement the FATF's requirements.
To begin with, the new guidance changes the definition of
who is a VASP. The current definition is intended to exclude ancillary parties
who do not engage or actively enable any of these covered activities, such as
organizations that supply Internet or cloud services. In other words, VASPs
must have control over crypto rather than simply facilitating its use, such as
through writing computer code for a decentralized finance application.
Additionally, it updates the "travel rule,"
which requires financial institutions to record and report information about
electronic fund transfer recipients and senders valued at least $3,000. This
rule applies just to transfers between VASPs and not to transfers to a private
wallet.
FATF's definition of VASPs includes any natural or legal
person who is a business, participates in trading VA's, and provides financial
services related to an issuer's offering and/or sale of VAs to or through
another legal or natural person.
There is less clarity on how it applies to decentralized
applications (DApps), which are blockchain-based services.
Guidelines clarify that decentralized projects are not
necessarily VASPs, and that merely calling them decentralized does not mean
they are.
It states that "creators, owners, and operators or
some other persons who maintain control or sufficient influence in the DeFi
arrangements, even if those arrangements seem decentralized, may fall under the
FATF definition of a VASP."

Pavan A
CBW - External Analyst
INDIA