Where’s Wally? FATF, Virtual Asset Service Providers, and the Regulatory Jurisdictional Challenge: FATF, Virtual Asset Service Providers, and the Regulatory Jurisdictional Challenge

Financial Action Task Force (FATF) standards require, at a minimum, that virtual asset service providers (VASPs) should be licensed or registered in the jurisdictions where they are created. In cases where the VASP is a natural person, they should be required to be licensed or registered in the jurisdiction where their place of business is located. FATF’s geographic jurisdictional approach has not received sufficient scholarly attention to date. This chapter addresses the current gap in the literature.
While FATF’s focus has been on bringing VASPs, including foreign VASPs, within the scope of domestic AML/CFT regulators, the chapter finds that insufficient attention has been given to the implications of this approach. How are domestic regulators going to establish sufficient supervisory hold over foreign entities that they register or license? How will they ensure effective supervision and, if required, enforcement of their laws? The FATF approach to date has not been sufficient to consistently deliver sufficient supervisory and enforcement hold over foreign entities with no real presence in the country. The authors submit that FATF can improve current processes by aligning its analysis and approach with those of tax authorities who have been battling similar challenges for much longer.