Regulatory framework to address money laundering risks across virtual assets to be issued soon: SCA

The SCA has completed its consultation with concerned authorities in the UAE to develop necessary regulatory framework to address the risks of money laundering and terrorist financing related to virtual assets and virtual asset service providers, the authority said in a statement.

The authority aims to ensure that the virtual assets sector adheres to the recommendations and requirements of the Financial Action Task Force (FATF).

The Securities and Commodities Authority is the sole authority in the UAE mainland – with the exception of the financial free zones, ADGM and DIFC – for licencing, supervising, and overseeing the virtual assets activities and services issued for investment purposes as well as monitoring the compliance of the licencees by the Authority with the recommendations and requirements of FATF. Also, the SCA does not regulate virtual assets issued for payment purposes.

This is in accordance with the Federal Decree No. 20 of 2018 on Anti-Money Laundering (AML), Countering the Financing of Terrorism and Illegal Organisations and its amendments and implementing regulations, the state-run news agency, Wam, reported.

Exchanges licensed by the SCA and other local competent authorities in the mainland can apply for a license for virtual assets exchange, subject to approval and its compliance withall regulations and procedures issued by the authority.

The SCA has also notified that any person wishing to conduct a virtual assets services provider business in the mainland must obtain an initial approval from the authority, in accordance with the Regulations Manual of the Financial Activities (the licencing rulebook), before obtaining a commercial license from the competent authority.

The authority also notified that virtual asset service providers who have commercial licenses and are providing any virtual asset services must apply to the authority to obtain the necessary licenses to practice such activity. They also need to confirm their obligation to comply with all legislation related to anti-money laundering controls in the country regarding virtual assets.

The Securities and Commodities Authority said that it looks forward to the cooperation and participation of all entities and concerned parties in establishing the protective compliance in accordance with the legislation, aiming to enable innovation through progressive regulations based on principles of due diligence and agility; using protocols to effectively reduce financial fraud and criminal activity by powerful real-time tracking; ensuring compliance with FATF directives on combating money laundering and terrorist financing; encouraging risk mitigation through awareness and training, disclosure, management, and governance; conducting proportionate and deterrent supervision; and ensuring compliance with FATF requirements by participants.

The SCA has confirmed that breach of the aforementioned regulatory and supervisory framework shall be subject to appropriate legal and supervisory actions.