AML Update: Crypto-Assets - VASPs must register with Central Bank
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FINANCIAL REGULATION
AML Update: Crypto-Assets –
VASPs must register with
Central Bank
May 2021
Virtual asset service providers (VASPs) operating
in Ireland are now subject to Ireland’s AML/CFT
framework and must register with the Central
Bank of Ireland.
Most of the Fifth Money Laundering This briefing summarises the MLD5 brought virtual currencies and their
Directive (MLD5) was transposed into Irish registration process, and sets out what providers into the scope of the EU’s AML/
law on 18 March 2021. Our recent briefing in-scope firms need to do next. CFT framework. In transposing MLD5
contains more detailed analysis: Arthur into Irish law, Ireland opted to base its
Cox Q&A: MLD5 Transposition and AML The rapid growth of virtual currencies, AML/CFT framework for VASPs on the
Horizon-Scanning. and the continually-evolving nature of definitions of “virtual asset” and “virtual
the virtual asset market, have triggered asset service provider” used by FATF in
A VASP carrying on business in Ireland a need to balance financial innovation its Standards on Virtual Assets and Virtual
is now a “designated person” for against the potential use of virtual assets Asset Service Providers, rather than on
the purposes of the Irish anti-money for money laundering (ML) or terrorist- the corresponding provisions of MLD5
laundering (AML)/countering the financing financing (TF). The Financial Action Task which are slightly narrower in scope.
of terrorism (CFT) framework, meaning Force (FATF) formally imposed AML/
that it is subject to AML/CFT obligations CFT obligations on VASPs in June 2019,
generally, and will need to register with and highlighted the lack of AML/CFT
the Central Bank of Ireland (CBI). These frameworks in jurisdictions in which VASPs
requirements came into effect on 23 April operate, together with the increasing
2021. anonymity of transactions in virtual assets,
as key ML/TF risks.
Virtual Asset
“A digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes”
This does not include digital representations of fiat currencies, securities or other financial assets.
This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright. © 2021 Arthur Cox LLP arthurcox.com
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AML Update: Crypto-Assets – VASPs must register with Central Bank
Virtual Asset Service Provider
A person who, by way of business, carries out one or more of the following activities for, or on behalf of, another person:
a. exchange between virtual assets and fiat currencies;
b. exchange between one or more forms of virtual assets;
c. transfer of virtual assets;
d. custodian wallet provider (i.e. an entity that provides services to safeguard private cryptographic keys on behalf of its
customers, to hold, store and transfer virtual currencies);
e. participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset or both.
This does not include a designated person that is not a financial or credit institution and that provides virtual asset services
in an incidental manner, and is subject to supervision by a national competent authority other than the CBI.
REGISTRATION WITH THE CBI Passporting? together with detail of its AML/CFT-
While MLD5 requires each EU Member related systems, controls, policies and
Registration not Regulation State to put a registration framework in procedures and details of the systems
The new registration requirement for place for VASPs, these frameworks are and controls in respect of its assurance
VASPs, while it is more detailed (in jurisdiction-specific i.e. being registered as testing programme; and
particular as regards the obligations it a VASP with the CBI will not give an entity • details of all VASP-related outsourced
imposes in respect of beneficial owners) the ability to passport its VASP-related functions.
than the AML/CFT framework introduced services into another EU Member State
for ‘Schedule 2’ firms, is not a fully-fledged and vice versa. If it wishes to also provide Fitness and Probity
regulatory regime. VASP-related services in another EU
The CBI is very focused on the fitness and
Member State, it will need to comply with
As mentioned in our recent briefing probity of a VASP’s beneficial owners and
any equivalent registration requirements
(Much Ado about Crypto – the Draft EU principal officers. By way of reminder:
in that jurisdiction.
Crypto-Assets Regulation), as part of its
• beneficial owners: for AML/CFT
September 2020 Digital Finance Package
Guidance purposes, an individual is a beneficial
the European Commission proposed an
owner of a body corporate if it
authorisation regime for issuers of asset- The CBI has published Information on directly (or indirectly through other
referenced tokens, and for crypto-asset Applications for Registration, together companies) holds > 25% of the shares
service providers, which would facilitate with an Instruction Manual and Guidance in that entity, or otherwise directly (or
passporting and introduce conduct of Note. indirectly through other companies)
business requirements. This regime
controls >25% of that body corporate.
(known as MiCA) is not expected to come
Process Individuals who have no legal or
into force until 2024.
beneficial interest in shares in a body
To register as a VASP:
corporate, but are senior managing
Who is in Scope? • an in-scope firm will need to submit a officials (such as the directors or
From 23 April 2021, VASPs established pre-registration form, following which the CEO), may be deemed to be its
in Ireland must register with the CBI as the CBI will allocate it a Central Bank beneficial owners if the body corporate
follows: Institution Number; cannot identify, with certainty, any other
• the CBI has recommended that individuals who may be its beneficial
• An entity that was already carrying on owners;
in-scope firms avail of an optional pre-
the business of a VASP in Ireland at 23 • principal officers: the directors,
application meeting with it; and
April 2021 has 3 months to submit its secretary, managers and similar officers
registration application. In the interim, • once it receives its Central Bank
Institution Number, an in-scope firm can of a VASP are its principal officers.
it will be deemed to have registered.
However, if it does not submit its complete the Registration Form and
As part of its application for registration,
registration application by 23 July 2021, submit it via the CBI’s Online Reporting
an in-scope firm must (in addition to its
it will no longer be able to operate until System (ONR).
own application form):
such time as it has made an application
and that application has been accepted. The applicant must have an AML/CFT • submit specific application forms in
framework in place before making its respect of each of its beneficial owners;
• An entity that wishes to start application. The application must be
operating as a VASP in Ireland • ensure that all relevant individuals
accompanied by supporting documents
(whether it is incorporated in Ireland who will hold Pre-Approval Controlled
and information including:
or not) after 23 April 2021 must first Functions complete Individual
register with the CBI. • an organisation chart and, if relevant, a Questionnaires as part of the CBI’s
group structure chart; Fitness and Probity framework.
• If a firm is already authorised by
the CBI (either subject to prudential • a business plan (including details of
A registered VASP must take reasonable
supervision or for conduct of business how transaction flows (of funds and
steps to ensure that its beneficial owners
requirements) and operates, or plans assets) will operate);
are “fit and proper” – failure to do so is
to operate, as a VASP in Ireland, it must • details of its beneficial owners and a criminal offence. It must also notify
also register as a VASP. principal officers (directors, secretary, the CBI if it has reasonable grounds to
managers and similar officers); suspect that one of its beneficial owners
• its AML/CFT business risk assessment, is not a fit and proper person.
arthurcox.com
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AML Update: Crypto-Assets – VASPs must register with Central Bank
Granting/Refusing Applications Ongoing Monitoring of Beneficial registration. It is important to note that,
• Grant: Where the CBI grants an Ownership before submitting an application, an
application for registration, it may As mentioned above, one of the CBI’s in-scope firm must have its AML/CFT
attach conditions. It may also amend key focus areas as part of the application framework in place. As a VASP is now
the scope of a VASP’s registration at process is the beneficial ownership of a “designated person” for AML/CFT
a later date (a VASP will have the right applicants. purposes, the following obligations apply:
to appeal that decision to the Irish • to carry out and document a business
Financial Services Appeals Tribunal This theme continues once an application
is granted, with CBI approval being risk assessment, which will underpin its
(IFSAT)). approach to customer due diligence;
required for the acquisition of a beneficial
• Refusal: Where the CBI refuses an interest in a registered VASP. Key • to identify and verify its customers and
application for registration, the firm determining factors will be the influence beneficial owners, and to monitor its
will be given the opportunity to make that the proposed acquirer is likely to relationships with its customers;
written submissions to the CBI as to exercise over the VASP’s business, its
why its application should be granted, • to report suspicious transactions;
reputation (and the reputations of its
and can also appeal the refusal to senior staff), its financial position, and • to put in place internal policies,
IFSAT. whether the acquisition could increase procedure and staff training; and
• Regulatory Disclosure Statement: ML/TF risk. • to keep records (noting that the CBI
Once a VASP’s application is may direct VASPs to retain additional
granted by the CBI, it must include a The CBI may also request information records beyond those that designated
regulatory disclosure statement in all from the Gardaí for the purposes of persons are already required to retain).
advertisements for its services stating determining if an applicant, a VASP, a
that it is registered and supervised by beneficial owner, or a principal officer is a
the CBI for AML and CFT purposes only. fit and proper person. FURTHER REGULATIONS?
The CBI may prescribe more details in If the CBI is concerned that a beneficial As mentioned above, VASPs are a key
respect of that regulatory disclosure owner is influencing a VASP’s affairs in a focus area for the FATF and it plans to
statement (font, size, colour etc.) but at manner which could impair the VASP’s carry out its second 12-monthly review
the date of writing it has not yet done ability to comply with Irish AML/CFT law, of its standards on virtual assets and
so. the CBI may issue a direction to the VASPs by June 2021. The Minister for
beneficial owner to take specific steps. Finance is empowered to make additional
• Revoking Registrations: A VASP’s
If the beneficial owner fails to comply, regulations giving the CBI further powers
authorisation can also be revoked
there are a number of options open to in relation to VASPs to reflect any
(whether at the instigation of the
the CBI via a court application, including evolution in the FATF’s recommendations
VASP, or the CBI). The CBI may also
an injunction, an order suspending the from time to time.
issue a direction to a VASP limiting
its activities to those set out in that beneficial owner’s voting rights, or an
direction (perhaps where the CBI is order directing the sale of the beneficial
OUR FINANCIAL REGULATION
concerned that there may be grounds owner’s holding in the VASP.
GROUP
for ultimately revoking the VASP’s
registration, but wishes to look into the Our Financial Regulation Group has
matter further). WHAT DOES AN IN-SCOPE FIRM extensive experience of advising on
NEED TO DO NOW? applications to the CBI for a wide range of
• Register: The CBI must also establish regulated firms, and would be very happy
and maintain a publicly-available In-scope firms, and those who plan to
provide VASP services in Ireland, should to assist with queries in relation to the
register of VASPs. scope of the new regime.
begin to prepare their applications for
KEY CONTACTS
Orla O’Connor Robert Cain Sarah Thompson Maedhbh Clancy
Partner, Chair of the Firm Partner Partner Of Counsel
+353 1 920 1181 +353 1 920 1050 +44 28 9026 5894 +353 1 920 1225
orla.oconnor@arthurcox.com robert.cain@arthurcox.com sarah.thompson@arthurcox.com maedhbh.clancy@arthurcox.com
Maximilian Riegel Sinéad Cantillon
Associate Professional Support Lawyer
+353 1 920 1475 +353 1 920 1083
maximilian.riegel@arthurcox.com sinead.cantillon@arthurcox.com
Dublin Belfast London New York San Francisco
+353 1 920 1000 +44 28 9023 0007 +44 207 832 0200 +1 212 782 3294 +1 415 829 4247
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