Canadian Cryptocurrency Firms Join Global Anti-Money Laundering Initiative | Bennett Jones LLP

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On May 24, 2022, nine Canadian cryptocurrency companies – Wealthsimple, CoinSmart, Netcoins, Shakepay, VirgoCX, Tetra Trust, BlocPal, Balance and Coinsquare – announced their adherence to the Travel Rule Universal Solution Technology (TRUST), an industry group formed to advance compliance with the Financial Action Task Force (FATF) Anti-Money Laundering Guidelines for Virtual Asset Service Providers (VASPs). TRUST, and its expanded Canadian membership, is a positive development for those seeking to prevent illicit cryptocurrency transactions, or aiming to trace funds into the hands of criminals when such transactions occur.

FATF Guidelines and TRUST

As we discussed in our previous overview, FATF Viewpoint on Digital Assets: Updated Guidance and Recommendations, in October 2021, the FATF updated its Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers (FATF Guidance). We noted that “people in the virtual asset space should be aware of the FATF guidelines, assess its potential implications for their business, and consider what steps to take to ensure compliance.”

Following updated FATF guidelines, TRUST was launched in February 2022 as a coalition of 18 US cryptocurrency companies. TRUST is “a platform that enables cryptocurrency exchanges to securely send information legally required by the ‘Travel Rule’. As described in the FATF Guidelines, the Travel Rule “includes the obligation obtain, maintain and submit required sender and recipient information associated with [virtual asset] transfers in order to identify and report suspicious transactions, take freezing measures and prohibit transactions with designated persons and entities.

While the standards and measures identified in the Travel Rule have long applied to traditional financial institutions, TRUST’s goal is for cryptocurrency companies to “achieve high-level compliance with the Travel Rule, while fully respecting customer expectations for how their information is handled.” Although the exact requirements vary by jurisdiction, the overall goal of the travel rule is to deter money laundering and other financial crimes by improving the ability of various law enforcement agencies to detect and respond to illegal activities.

Specifically, TRUST ensures that member VASPs obtain and maintain certain payer and payee information for any cryptocurrency transaction over $1,000. This is intended to improve the likelihood of identifying and mitigating the risks inherent in peer-to-peer cryptocurrency transactions and, in the event of illicit transactions, to provide valuable information to help trace assets back into the hands of malefactors.

TRUST in Canada

In Canada, which is a FATF member country that regularly incorporates the FATF guidelines into its national legislation, the industry’s decision to join TRUST and coordinate the implementation of the travel rule indicates the willingness of Canadian TRUST members to help governments combat money laundering and other financial crimes involving cryptocurrencies, and a desire to bring appropriate consistency and transparency to the cryptocurrency industry more usually.

Additionally, as cryptocurrency fraud becomes more widespread globally and the Canadian government continues to address and create legal frameworks for the emerging cryptocurrency and blockchain industries, this new Canadian industry-led step seems likely to expand the tools available to anti-money practitioners. money laundering, cryptocurrency litigation and asset recovery spaces to help those who are at risk of or have been victims of illicit cryptocurrency transactions.

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