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How To Perform An AML Compliant Token Sale – TAG Consultancy

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Background to an AML compliant token sale

There is a global move towards the regulation of virtual assets (“VA’s”) and Virtual Asset Service Providers (“VASP’s”) under the Financial Action task Force (“FATF”). Included in this category are the issuance of token sales, at which Gibraltar is at the forefront. Accountant services in Gibraltar!

Below we will aim to describe the requirements of a fully AML compliant token sale from Gibraltar, though the processes would not differ significantly from jurisdiction to jurisdiction.

What is a token sale

Specifically, the POCA 2015 (page 55) captures the following:

“undertakings that receive, whether on their own account or on behalf of another person, proceeds in any form from the sale of tokenised digital assets involving the use of DLT or a similar means of recording a digital representation of an asset”.

Conducting an AML Compliant Token sale

  1. Type of token sale

Consideration will be required on whether to perform any of, or a combination of the following:

 

(1) Private sale
(2) Public sale

The workload, processes, procedures and overall risk profile will vary significantly depending on the type of token sale being conducted.

  1. Key documentation

A business risk assessment will need to be conducted in order to assess the AML/CFT risks associated with the business operations.

In addition to this, policies and procedures will need to be drafted for AML/CFT as defined in Section 26A of POCA.

Finally, a compliance report will need to be completed.

  1. Due Diligence

The type of due diligence will be driven by the risk profile of the token purchaser, with consideration required on the 4 risk categories as follows:

Customer Risk

Interface Risk

Country Risk

Product Risk

The Due diligence information for consideration will always be:

Proof of ID

Proof of address

Source of wealth and source of funds

  1. Systems and software for collection of data

It is common to use systems and software for the purposes of gathering and storing KYC and Due Diligence information. These are sometimes done using simple forms, such as Google sheets, or software when there are large volume of data to review.

In any instance, it must be fit for purpose, secure and safe.

  1. Wallet screening

Due to the transparent nature of blockchains, it is possible to employ wallet screening checks as part of the process, in order to track the origin of funds and ensure that it is not originating from a malicious source. Wallet screening is generally performed by using a third party software provider and the parameters can generally be tailored to be more/less sensitive, depending on the risk appetite of the firm.

The Team at TAG Consultancy have assisted entities in conducting fully compliant AML token sales and would be happy to assist you with the entire process from start to end.

Get in touch with us here to find out more!

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