BVI VASP Update: A Two Step Approach

As widely expected, the British Virgin Islands ("BVI") is shortly bringing into force new legislation to implement the Financial Action Task Force's standards on virtual assets and virtual asset service providers (known as "VASPs").

The BVI is taking a two-step approach: AML/CFT/CPF compliance is required from 1 December 2022, and registration with the BVI financial services regulator (the "FSC") within six months of the new VASP law coming into force.

In relation to AML/CFT/CPF, the first key compliance date for VASPs is 1 December 2022. On this date, a VASP who is carrying on or providing "virtual asset services" when a transaction involves virtual assets valued at US$1,000 or more will need to be compliant with the BVI's Anti-Money Laundering Regulations ("AMLR") and related Anti-Money Laundering and Terrorist Financing Code of Practice ("Code").  The AMLR include the key definitions of "virtual asset services" as well as a VASP so there is clarity on who will need to comply from 1 December.

The compliance obligations in the AMLR and the Code have as their goal ensuring the VASP has in place effective systems and controls to mitigate the risk of the business being used for financial crime, such as money laundering, sanctions breaches, terrorist financing and proliferation financing. The obligations are extensive.  They include having in place a Money Laundering Reporting Officer, as well as appropriate policies and procedures to identify and mitigate financial crime risk.

These procedures include establishing and maintaining an effective system to identify and verify the identity of customers and prospective customers, risk rating the business's products and services, its customers and delivery channels, as well as having in place effective sanctions screening, record keeping, staff training, testing, and establishing an effective system in relation to suspicious activity and transaction monitoring and reporting. Compliance with the "travel rule" is also required for transactions over a specific threshold. Outsourcing to specialist service providers is permitted, though the compliance obligations remain with the VASP.

The BVI is expected shortly thereafter to bring into force its Virtual Asset Service Providers Act ("VASP Act"), currently in draft. Like many other jurisdictions, the BVI is establishing a registration regime for VASPs, requiring them to be registered with the FSC. There is expected to be a period of "transitional relief" of six months for VASPs to make their application to the FSC without having to stop their business (although full compliance with the AMLR and Code is mandatory during this time).

Although the go live date of the new VASP Act (and the final version) is yet to be published, it is expected to be in December or in the first quarter of 2023. Although the final text of the new VASP Act is not yet published, the definitions of a VASP and a virtual asset service in the draft law currently mirror those in the AMLR and Code and are not expected to change.  

Walkers Regulatory & Risk Advisory group has dedicated specialists across our global offices with extensive experience of advising businesses operating in this field, including advising on compliance with the AMLR and the Code. We also have extensive experience of making applications to regulators, including the FSC. For more information please reach out to your usual Walkers contact, or any member of the Regulatory & Risk Advisory group.

Matthew Cowman Managing PartnerT +1 284 852
Lucy FrewPartnerT +1 345 814
Paul WaldronPartnerT +1 284 852

Lucy FrewPartnerT +1 345 814
Andrew HowarthPartnerT +1 345 814
Charlie Griffiths AssociateT +1 345 814 4659

Sara HallPartnerT +44 (0)20 7220