VASPs und die "Travel Rule": Ein steiniger Weg

Blockchain, DLT, Virtual Asset Service Provider

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The Financial Action Task Force (FATF) has been monitoring the development of distributed ledger technology (DLT) and its related ecosystem since it first published a report in 2014 on the risks of money laundering in virtual currencies.

Since then, the inter-governmental body published a Guidance for a Risk-Based Approach on Virtual Currencies (2015), introduced relevant definitions (2018) and most recently during last week’s plenary meeting, adopted an updated version of its 2015 Guidance, now entitled “Virtual Assets and Virtual Asset Service Providers”.

The long-awaited Guidance blew in as some predicted. DLT entities involved in activities relating to Virtual Assets (VA) that voiced their concerns directly to the FATF during consultations in Vienna in May quickly realized that most of the concerns they raised were not reflected in the final version the Guidance. Such entities are now left implementing costly additional technical solutions and compliance measures, while decentralized counterparts (think purely peer-to-peer exchanges) are free to continue offering solutions that optimize privacy, to the dismay of law enforcement.

Roadblocks and Potholes

In order to allow Member States to better understand how to mitigate money laundering risks associated with VAs, thereby protecting the integrity of the global financial system, the FATF’s updated Guidance further details how its Recommendations may be applicable to VAs, VA financial activities or Virtual Asset Service Providers (VASPs).

We noted the following elements:

  • Risk Assessment: While VASPs or VA activities may not be categorized as inherently high risk, the list of elements which may contribute to an elevated risk assessment for such entities is extensive, resulting in nearly all VA activities effectively being qualified as high risk, and the assessment of each risk factor presenting its own practical challenges for the industry. In particular, determining the quality of a country’s regulatory and supervisory framework or evaluating a VASP’s implementation of risk-based controls depends on the availability of credible sources and standards, which at the moment are limited. By indicating that the absence of face-to-face contact in VA activities may indicate higher ML/TF risks, the FATF may indirectly hinder VASPs seeking to employ alternative, yet equally compliant identification methodologies. The list goes on…
  • Travel Rule: VA transfers that are functionally analogous to wire transfers and take place between a VASP and other obliged entities (i.e. VASP, bank or other financial intermediate) require the ordering / originating party to obtain, hold and transmit required information on both the transactions’ originator and beneficiary, including names, account numbers, etc. Similar requirements are placed on receiving / beneficiary VASPs. In practice, this poses a number of technical and data privacy challenges. While most VASPs will find solutions to comply in time (e.g. transferring data via encrypted messaging), the average consumer may prefer the familiar comfort and privacy (together with opaque transparency) of traditional banking and fiat transactions, rather than opting for services that exchange personal data between parties and inscribe transactions on a public ledger. 


A Call to Action

Full transparency is the new standard for VASPs and other VA service providers in the DLT space. The masses pushing for regulated alternative financing must now race to develop technical solutions to ensure the “immediate and secure” transmission and collection of DLT-based data, while at the same time being rated by the traditional financial system as “high risk”, else lose the battle for adoption to decentralized privacy solutions.

Let this therefore be a call to action for Switzerland’s crypto valley and other global consortiums; in the spirit of decentralized self-governance, VASPs should cooperate to establish a new SWIFT-like transfer network or platform for the secure transfer of transactional data and establish new standards. All efforts to facilitate compliance for regulated VA pioneers will have far reaching positive impacts, since such entities will be more likely to provide identity, ownership and affordable financial services to the world’s unbanked and undocumented population. Whenever possible, it’s an investment worth supporting.

MME is a law firm based in Zug and Zürich that specializes in providing legal, tax and compliance advisory services for DLT projects since 2013.

Juni 2019 | Autor: Christine Gschwend

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