While in June 2021, a total of 641 service providers had a virtual asset service provider licence, today that number has decreased to 45 service providers. ‘Although this represents a significant reduction in risks, the work is still ongoing. The reports submitted to us since the beginning of this year serve as key input for supervision in order to understand whether and what money laundering and terrorist financing risks we face. We would like to thank all service providers who prepare and submit the reports to us. In return, we strive to offer feedback on our observations of these reports, thereby assisting market participants in managing risks,’ said Laura Aus, Deputy Head of the Financial Intelligence Unit.
The figures for the first half of the year indicate, among other things, high turnovers in low-tax territories*, primarily involving a small number of customers who are legal persons.
The value of virtual currency wallet service transactions exceeded €5 billion in the first half of the year, with transactions involving Curacao customers accounting for more than half of this amount. The value of virtual currency exchange service against a fiat currency, transfer service (without changing the currency) and services for exchanging a fiat currency against a virtual currency or a virtual currency against another virtual currency totalled around €2.5 billion.
Among the low-tax territories, customers with the highest turnover included, in addition to the above, the Isle of Man, Cyprus, Seychelles, British Virgin Islands, Vanuatu and others. These customers include primarily legal persons and they are concentrated with a small number of virtual asset service providers.
‘We have identified cryptocurrency casinos as being behind customers from low-tax territories,’ Aus added. By offering services to crypto casinos or related companies, virtual asset service providers also assume the risks associated with crypto casino customers.
‘The provision of such a “nested service” is essentially a correspondent relationship, which significantly heightens the risks of money laundering and terrorist financing. Behind the “account” of a single customer who is a legal person, there may be thousands or even hundreds of thousands of subsequent customers, whose identification and transaction monitoring may exceed the capabilities of the local service provider. However, the risks associated with these customers and the potential reputational damage are transferred to both the service provider and the state,’ explained Laura Aus.
The Financial Intelligence Unit will continue to supervise the prevention of money laundering and terrorist financing in the virtual asset service provider sector on a risk-based approach and to the extent that resources allow.
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*Low-tax territories or countries are often associated with higher risks of money laundering and terrorist financing, as international assessments indicate that their risk management solutions are inadequate or they are used to obscure information about beneficial owners.
