knowledge 27 June 2023 |

Ireland as a Location for Virtual Asset Service Providers 2023

The Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2021 extends the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 to 2021 (the “CJA 2010”) to virtual asset service providers (“VASPs”).

VASPs are “designated persons” for the purposes of the general Anti-Money Laundering and Countering the Financing of Terrorism (“AML/CFT”) obligations set out under the European Union anti-money laundering directives and in Ireland in the CJA 2010.

Under the CJA 2010, a VASP is defined as:

“a person who by way of business carries out one or more of the following activities for, or on behalf of, another person:

  1. exchange between virtual assets and fiat currencies;
  2. exchange between one or more forms of virtual assets;
  3. transfer of virtual assets, that is to say, conduct a transaction on behalf of another person that moves a virtual asset from one virtual asset address or account to another;
  4. custodian wallet provider;
  5. participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset or both; but 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 [Central Bank of Ireland].”

A custodian wallet provider means “an entity that provides services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies”.

A ‘virtual asset’ means “a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes but does not include digital representations of fiat currencies, securities or other financial assets”.

There is a carve-out from the definition of a VASP for a designated person that is not a financial or credit institution that provides virtual asset services in an incidental manner and is subject to supervision by a national competent authority, other than the Central Bank of Ireland.

Why Firms Choose to Register in Ireland

Ireland is home to a substantial number of crypto firms, some home grown and others drawn to Ireland by its active and thriving FinTech Sector.

Aside from Ireland’s position as a FinTech hub, there are a number of advantages to operating in Ireland, including:

  • a strong regulatory framework with a credible and experienced regulator, the Central Bank of Ireland;
  • the ability to engage with the Central Bank of Ireland through its Innovation Hub;
  • a favourable tax regime, due to a combination of a 12.5% corporate tax rate and an exceptionally extensive and comprehensive set of double tax agreements; and
  • access to a sophisticated financial services ecosystem with a deep pool of staff, managers, professional advisers and service providers including not only native English speakers but a sizeable international population.

Registration Process

Before applying for registration as a VASP, a firm should establish that the services it is proposing to offer constitute VASP services as set out in the CJA 2010 and that it is in a position to comply with its AML/CFT obligations under the CJA 2010.

The registration process requires an applicant to complete:

  • A VASP AML Registration Form;
  • Beneficial Owners Application Forms. Depending on whether the beneficial owner is a legal person or a natural person, the following forms will need to be completed:
    1. Application for each Legal Person or Other Entity Type who is a beneficial owner in an Applicant VASP
    2. Application for each Natural Person who is a beneficial owner in an Applicant VASP;
  • Fitness and Probity Individual Questionnaires for all relevant individuals proposed to hold Pre-Approval Controlled Function roles.

The Central Bank of Ireland offers the facility of an optional pre-application meeting to applicants, in order to answer specific questions about any aspect of the registration process and the completion of the VASP AML/CFT Registration Form. It is recommended that applicants avail of this meeting.

Applicants should have prepared their registration material to an advanced state before requesting such a meeting, and should have their specific questions prepared in advance, so that the meeting can be as productive as possible.

The registration process is as follows:

Stage

Details

Pre-registration

A candidate should complete the VASP AML Registration Form. Once complete, this should be submitted to the Central Bank of Ireland.

The Central Bank of Ireland then issues an email to the applicant containing an Institution Number, a Reporting Date and details on how to access and submit a VASP AML/CFT Registration Form via the Central Bank’s Online Reporting ('ONR') system.

The applicant then submits a VASP AML/CFT Registration Form and all supporting documentation through the ONR system.

Stage 1: Acknowledgment

The Central Bank of Ireland will acknowledge receipt of the applicant’s VASP registration submitted on the ONR system.

Stage 2: Information Check

The Central Bank of Ireland will check that the application for registration information and documentation submitted on the ONR system is complete (i.e. contains all the required information and documentation).

The Central Bank of Ireland then:

  • advises the applicant that the registration contains the required information and documentation to proceed to the assessment phase; or
  • advises the applicant that the registration application does not contain all the required information or documentation. If this happens, details of any information omitted from the registration application will be provided to the applicant who will then have an opportunity to provide this information.

Stage 3: Assessment Phase

Once all required information and documentation is provided, the Central Bank of Ireland conducts an assessment of the registration application against the registration requirements.

During the assessment phase, the Central Bank of Ireland will issue comments and/or questions to the applicant based on its assessment and review of the application for registration. The Central Bank of Ireland may also request further documentation to be provided by the applicant.

Stage 4: Notification of Assessment

The Central Bank of Ireland notifies the applicant of the outcome of the assessment process.

If applicable, the applicant will be given the opportunity to address concerns arising at this stage of the process.

Stage 5: Notification of Decision

The Central Bank of Ireland will notify the applicant of its decision to grant or refuse the registration.

Registration may be subject to specific conditions.


Consequences of registration

As a result of registration, VASPs will be "designated persons" for the purposes of the CJA 2010 and are required to comply with the AML/CFT obligations contained under the CJA 2010 which include:

  • carrying out a money laundering risk assessment of their business and their customers;
  • undertaking customer due diligence of their customers;
  • carrying out ongoing monitoring of customers and customer transactions;
  • filing Suspicious Transaction Reports (STRs) with Financial Intelligence Unit (FIU) Ireland and the Revenue Commissioner in instances where money laundering or terrorist financing is known or suspected;
  • maintaining and implementing AML/CFT policies, procedures and controls;
  • retaining appropriate records; and
  • providing AML/CFT training to all staff on an ongoing basis.

The Central Bank of Ireland implements a graduated approach to AML/CFT supervision. This means that higher intensity and intrusive supervisory measures (e.g. onsite inspections and review meetings) are used to monitor firms that present a higher risk of AML/CFT.

How Can McCann FitzGerald LLP Help?

McCann Fitzgerald LLP is a premier law firm in Ireland and advises on the full range of legal, tax and compliance activities undertaken by virtual asset service providers in Ireland. We have experience in guiding applicants through the virtual asset service provider registration process and in helping clients to comply with their legal obligations, once registered. If you are considering setting up a virtual asset service provider in Ireland, please contact us for further information as to how we can help.

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.