Oct 2018 Charity & NFP Law Update
FATF Plenary Prioritizes Virtual Assets
The first Plenary meeting of the 2018-2019 Financial Action Task Force (“FATF”) took place in Paris from October 17 to October 19, 2018. The Plenary meeting follows the stated objectives of the incoming president of the FATF, the US Department of the Treasury’s Assistant Secretary, with regard to prioritizing how the FATF standards apply to virtual currency providers and related businesses.
In this regard, while recognizing that virtual assets and related financial services have the potential to improve financial inclusion, which is of concern to charities and not-for-profits operating in certain parts of the world with inadequate financial services infrastructure, the Plenary released a Statement indicating how the FATF will provide clarification to its various member states in managing the money laundering and terrorist financing risks of virtual assets.
The Statement explains that the FATF has adopted changes to its FATF Recommendations and Glossary by adding new definitions of “virtual assets” and “virtual asset service providers” (“VASP’s”) that clarify how the FATF Recommendations apply in case of financial activities involving virtual assets, including crypto currencies. “Virtual assets” refer to “digital representations of value that can be digitally traded or transferred and can be used for payment or investment purposes, including digital representations of value that function as a medium of exchange, a unit of account, and/or a store of value”, and VASP’s refer to cryptocurrency exchanges, certain types of wallet providers, and providers of financial services for Initial Coin Offerings.
The Statement further encourages member states to take urgent legal and practical steps to prevent the misuse of virtual assets and clarify that FATF recommendations require monitoring and supervision only for purposes of anti-money laundering and counter-terrorism financing.