Virtual Assets (VAs) have grown exponentially over the past few years with record prices and heightened activity in the VA ecosystem, attracting the attention of regulators and other stakeholders. The Financial Action Task Force (FATF), as the global standard-setter for combating money laundering and the financing of terrorism and proliferation of weapons of mass destruction, acknowledges both the potential of VAs for financial innovation and their propensity for criminal use through Money Laundering (ML) and Terrorism Financing (TF).
To this effect, Mauritius concluded its National Risk Assessment (NRA) with respect to the VA sector in November 2021. This risk assessment exercise relied upon the World Bank methodology and risk assessment tool. The NRA has enabled the identification and evaluation of the associated ML and TF threats, as well as, vulnerabilities with VAs and Virtual Asset Service Providers (VASPs) through a sectoral approach.
At the time of the assessment, the overall ML/TF residual risk associated to VAs/VASPs was considered to be “Very High” after the consideration of mitigating measures. The combined ML/TF vulnerability ratings indicated a general tendency of “High to Very High” vulnerabilities driven by factors such as the nature and complexity of the VASP businesses, country risks, customer types, products and services of the VA ecosystem and their operational features (for instance, anonymity, speed of settlement and whether the VASPs were registered).
The combined ML/TF threat ratings indicated a general tendency of “Medium to High” threats driven by factors, such as the nature and profile of VAs, their sources of funding, the ease with which VA channels are accessible to criminals and their economic impacts. VASPs and Issuers of Initial Token Offerings must take into account any relevant findings of the NRA while conducting their business risk assessments.
A copy of the NRA report is available here.