As published on step.org/industry-news, Monday 30 May, 2022.
The Jersey government's first national risk overview of the virtual asset sector has assessed the anti-money laundering (AML) risks as limited, because the jurisdiction's careful approach to virtual assets has kept the sector small.
Only three virtual asset service providers (VASPs) have so far registered with the Jersey Financial Services Commission (JFSC), although there is also some indirect exposure where business is carried on with entities who themselves deal with virtual assets directly, says the JFSC. It notes that the virtual asset business is global and VASPs frequently operate across several jurisdictions, increasing the risks at the same time as reducing clarity on which jurisdiction is ultimately responsible for virtual asset regulation and which persons are subject to AML measures.
The government report highlights that Jersey is not currently aligned to the global Financial Action Task Force's (FATF) standards for VASPs and will become so only when the Proceeds of Crime (Amendment No. 6) (Jersey) Law 202- comes into force. The jurisdiction's conservative approach to virtual assets has acted as a mitigating factor, but it has also discouraged authorities and firms from developing a deeper understanding of the sector and the risks it can present, says the JFSC. 'A lack of experience and knowledge means that firms interacting with VAs may be ill-equipped to adequately address the risks', it warns.
The report is an interim step in meeting FATF's risk assessment requirements. However, the Jersey government notes that it expects the virtual assets sector to grow ‘significantly’ in the near future. When the amended proceeds of crime law comes into effect the JFSC will be able to collect relevant data to enable the authorities to undertake a full risk assessment.