FATF Recommendation 15 addresses AML/CFT risks from new products, delivery mechanisms and virtual assets. It calls for pre-launch assessment and licensing, supervision and controls over virtual-asset service providers, with implementation through the national laws and authorities.
TL;DR:
- Assess new-product, channel and technology financial-crime risks before launch or use.
- Virtual-asset standards call for VASP licensing or registration, supervision and preventive controls.
- Activities determine classification; national law defines binding permissions and transfer-data duties.
Summary
Assessing new risks before a product goes live
Recommendation 15 calls on countries and financial institutions to identify and assess money-laundering and terrorist-financing risks arising from new products, business practices and technologies. For institutions, assessment should take place before launch or use. The subject includes new delivery mechanisms and use of developing technology in existing products. This makes financial-crime risk part of product design, rather than a question addressed only after a service has accumulated customers and transactions.
The virtual-asset and VASP framework
The Recommendation and its Interpretive Note extend the preventive framework to virtual assets and virtual-asset service providers. FATF calls for licensing or registration, effective supervision and measures to prevent misuse of the sector. The applicable classification depends on the activities performed. A software, wallet or exchange label alone does not settle whether the business is a VASP, and a local framework determines the legally binding boundary and conditions for operating within it.
Preventive controls follow the activity
FATF's explanation of virtual-asset standards includes customer due diligence, record keeping, suspicious-transaction reporting and collection and secure transmission of originator and beneficiary information. These functions need to work with the service's technical design and counterparties. Transfer transparency is not satisfied merely because a transaction is visible on a ledger: the institution also needs the required information about the people or entities involved and a process for handling the risks it identifies.
Proportional implementation alongside innovation
Technology can change anonymity, speed, distribution and cross-border reach, but innovation is not itself proof of illicit activity. The risk-based framework seeks measures proportionate to the exposure. Countries implement the standard through legislation and supervision, so a firm needs to distinguish FATF's international expectations from the permissions and duties in its own jurisdiction. The relevant version, actual business activities and applicable local requirements together determine how Recommendation 15 informs a payment or virtual-asset proposition.
Keywords
- Recommendation 15
- new technologies
- pre-launch assessment
- virtual assets
- VASP licensing
- provider supervision
- preventive controls
- transfer information
- delivery mechanisms
- financial-crime risks