2018 October: At its Plenary in Paris last week the Financial Action Task Force (FATF), the independent inter-governmental body that develops and promotes policies to protect the global financial system from money laundering and terrorist financing, resolved to amend its policy recommendations to require virtual asset service providers be licensed and subject to anti-money laundering regulations and compliance monitoring.
The FATF noted that cryptocurrencies and other virtual assets “create new opportunities for criminals and terrorists to launder their proceeds or finance their illicit activities” and that “There is an urgent need for all countries to take coordinated action to prevent the use of virtual assets for crime and terrorism”. All countries are encouraged to quickly take the necessary steps to prevent the misuse of virtual assets. The FATF will be reviewing its standards as they apply to the virtual asset sector within the next 12 months.
The term 'virtual asset' is taken to refer to digital representations of value that can be digitally traded or transferred and can be used for payment or investment purposes, including digital representations of value that function as a medium of exchange, a unit of account, or a store of value.
The FATF’s announcement is in response to requests from governments and the private sector for greater clarity about exactly which virtual asset activities its standards apply to. In July, G20 countries' finance ministers stated the need for urgent action to address the “real and growing' money laundering, terrorist financing and tax evasion risks from crypto assets, and ordered FATF to report back in October 2018, focusing on customer due-diligence, fund transfers, supervision and enforcement.”
Under Cook Islands law, anyone engaged in specified activities provided in regulation is required to comply with the provisions of the Financial Transactions Reporting Act 2017. Virtual currency business, which includes trading, issuing, lending, transferring, storing and managing virtual currencies, is a named specified activity. Therefore, anyone engaging in such activity in the Cook Islands or through a Cook Islands incorporated or registered entity is required to obtain due diligence on customers, monitor financial transactions and report suspicious transactions associated with their business. At present, those engaged in virtual currency business are not licensed in the Cook Islands and therefore not regulated and supervised by the Financial Supervisory Commission.