, Tim Waghorn May-10-2021 in Banking & Financial Services
The Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (the “CJA 2010”) has been amended by The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 (the “CJA 2021”) to transpose elements of the Fifth Anti-Money Laundering Directive into Irish law.
In particular, the CJA 2021 obliges VASPs to register with the Central Bank of Ireland for anti-money laundering and counter-financing of terrorism (“AML/CFT”) purposes.
The provisions of the CJA 2021 that relate to virtual asset service providers (“VASPs”) commenced on 23 April 2021.
What is a VASP?
Virtual assets are defined by the CJA 2021 as “a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes but does not include digital representations of fiat currencies, securities or other financial assets”. Colloquially, Bitcoin, other cryptocoins (such as Ethereum and the “viral” digital coins such as Dogecoin) and NFTs (non-fungible-tokens) as recently popular in the art world fall within this definition.
For the purposes of the legislation, VASPs are firms that provide any of the following services relating to virtual assets:
- exchange between virtual assets and fiat currencies;
- exchange between one or more forms of virtual assets;
- transfer of virtual assets, that is to say, to conduct a transaction on behalf of another person that moves a virtual asset from one virtual asset address or account to another;
- custodian wallet provider; and
- participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset or both.
What does this mean for VASPs?
VASPs will now be classified as ‘designated persons’ under the CJA 2010 as amended and will be obliged to adhere to AML/CFT obligations under the CJA 2010. Below is a non-exhaustive list of some of the ongoing AML/CFT obligations that are now applicable to VASPs:
- carrying out a money laundering / terrorist financing (ML/TF) risk assessment of their business;
- undertaking customer due diligence (CDD) of their customers;
- carrying out ongoing monitoring of customers and customer transactions;
- filing Suspicious Transaction Reports (STRs) with Financial Intelligence Unit (FIU) Ireland and the Revenue Commissioner in instances where money laundering or terrorist financing is known or suspected;
- maintaining and implementing AML/CFT policies, procedures and controls;
- retaining appropriate records; and
- providing AML/CFT training to all staff on an ongoing basis.
Registration
The registration process can be summarised as follows:
- Registration with the Central Bank: Persons carrying on a business as a VASP are required to register with the Central Bank for AML/CFT purposes. Subject to a transition period, it is a criminal offence to carry on business as a VASP without being registered.
- Transition period/existing authority: Persons already carrying out a VASP business in Ireland have a three-month window in which to register with the Central Bank. Firms that are currently authorised by the Central Bank for prudential and/or conduct of business services are now obliged to register any VASP activity with the Central Bank.
- Approval: In order for the Central Bank to approve a VASP's application for AML/CFT registration, the Central Bank must be satisfied that the firm’s AML/CFT policies and procedures are effective in combatting the money laundering and terrorist financing risks associated with its business model, and that the firm’s management and beneficial owners are fit and proper.
- Refusal: The Central Bank may refuse registration where it is not satisfied that the applicant, the beneficial owner of the applicant or the principal officer (where the applicant is a body corporate), is not a fit and proper person. Other grounds for refusal include failure on the applicant’s part to satisfy the Central Bank that its business risk assessment, policies and procedures are adequate or fit for purpose. The Central Bank may also refuse registration if it has reasonable grounds to believe that any or all information provided by the applicant as part of the registration process is false or misleading.
Next steps
Businesses having involvement with virtual assets, whether cryptocoin or otherwise, should undertake a review of their business operations to assess (i) whether they are dealing with virtual assets as defined by the CJA 2021 and (ii) if so, whether they are providing services designated by legislation as requiring registration.
If the answer to these questions is in the affirmative then the transition period has begun and the business should look to engage with the Central Bank in relation to registration and take advice as to the completion of pre-registration and registration documentation required by the Central Bank.
It is important businesses bear in mind that existing registration with, licence or authorisation from the Central Bank under other legislation does not excuse businesses from their obligations as a VASP.
For further information, please contact Michael Hanley mhanley@hayes-solicitors.ie or Tim Waghorn twaghorn@hayes-solicitors.ie.
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About the Author
Tim Waghorn
Tim is a senior associate solicitor in the Banking and Financial Services team at Hayes solicitors. Tim has extensive experience advising both borrowers and lenders across a wide range of financing transactions including corporate debt facilities, complex cross-border financings, export-credit backed lending and leveraged/acquisition finance.