Anti-Money Laundering Framework For Virtual Assets to be Issued Soon – SCA, UAE
Anti-Money Laundering Framework For Virtual Assets
As per a statement issued by the UAE Securities and Commodities Authority (SCA) on March 8, 2022, it is about to release a regulatory and supervisory framework for virtual assets where they are used for investment purposes. In regards to this, SCA consulted with relevant authorities in UAE to develop such a framework.
The consultation, which focused on the development of such a framework to deal with money laundering and terrorist financing risks in virtual assets and vendors of virtual assets in UAE, is completed. With this anti-money laundering framework, the SCA aims to ensure the virtual asset sector complies with the requirements and recommendations of the Financial Action Task Force (FATF).
Any actions by virtual asset service providers that are against this framework will be considered a breach of the SCA’s framework and hence, subject to legal actions.
The SCA is responsible for:
- Providing licenses to virtual assets service providers that issue virtual assets for investment purposes
- Supervising the activities and services of these service providers
- Monitoring their compliance with the requirements and recommendations of the FATF
- Overseeing their operations in accordance with the AML and CFT regulation and laws of the UAE
If exchanges intend to obtain a license for virtual assets exchange, it must be licensed by the SCA and other competent authorities in mainland UAE. Only then it can apply for virtual assets exchange license. For the license, it must comply with all the relevant procedures and requirements of the SCA, post which SCA will grant approval.
To obtain a license for virtual assets service provider in mainland UAE, the applicant needs a commercial license from a competent local authority. Prior to the license, it must get approval from the SCA under the Regulations Manual of the Financial Activities, also called the licensing rulebook. The virtual asset service providers, already having commercial licenses and offering virtual asset services, must still apply to SCA for the necessary license. This license will confirm that they comply with necessary provisions of anti-money laundering regulations for virtual assets in the country.
With this supervisory and regulatory framework, the SCA aims to:
- Enable participating entities to innovate to address the requirements of due diligence and agility in the regulations
- Make efforts to ensure compliance of all entities with FATF directives on fighting money laundering and terrorism financing
- Manage and control the activities of entities in a balanced way
- Adopt real-time tracking to minimize any fraudulent financial activities and criminal actions of participants
- Create awareness, conduct training, and implement disclosure, management, and governance strategies to reduce money laundering risks
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Virtual assets include digital art, text, videos, in-game items, images, music, cryptocurrencies, and virtual real estate.
A virtual asset is an asset held digitally or virtually. It is a digital value that you can virtually trade, transfer, and use for investment and payment.
A cryptocurrency is a type of virtual asset. But not all virtual assets are cryptocurrencies.
According to FATF, “virtual asset” refers to any digital representation of value that can be digitally traded, transferred or used for payment.
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About the Author
FCA, CAMS, CISA, CS, DISA (ICAI), FAFP (ICAI)
Pathik is a Chartered Accountant with more than 22 years of experience in compliance management, Anti-Money Laundering, tax consultancy, risk management, accounting, system audits, IT consultancy, and digital marketing.
He has extensive knowledge of local and international Anti-Money Laundering rules and regulations. He helps companies with end-to-end AML compliance services, from understanding the AML business-specific risk to implementing the robust AML Compliance framework.