Why is AML Mandatory for Virtual Assets Service Providers in UAE?

Why is AML Mandatory for Virtual Assets Service Providers in UAE?

Virtual assets now bring the biggest online financial trading, investing, and other opportunities for the general public. Thus, the role of a virtual asset service provider is crucial in the VASP industry. Thus, the UAE government understands that VASP's compliance with AML can help deter ML issues. This blog teaches the necessary AML obligations for virtual asset service providers.

Understanding anti-money laundering regulations in UAE is a crucial and mandatory step that various financial institutions should adhere to. This includes virtual asset service providers. There is a very clear advancement in terms of the usage of virtual assets. Despite its many benefits for traders and investors, it has become the most favourable target for financial crimes. 


Before we dig deeper into understanding virtual asset service providers and AML regulations, let us start with a laymans introduction to Virtual assets. In this blog, you can find informative details about virtual assets, which are virtual asset service providers, and why they need AML compliance in UAE

What is a Virtual Asset? 

For the general publics understanding, virtual assets are cryptocurrencies, DeFi, and NFTs. In reality, virtual assets are one of the broadest concepts that are always advancing. 


Given this, virtual assets are a digital representation of value that can be digitally traded, transferred, and used for payment or investment purposes. 


In addition, there are crucial elements required in a virtual asset. They are: 

  • Virtual assets need to be digital 
  • VA should have features to be transferred or traded digitally 
  • VA should hold some values to be used for payment or investment. 

All these features can be easily enabled through the help of protocols provided by Distributed Ledger Technology. However, it is to note that VAs are not defined as the digital representation of Fiat Currency, shares, securities, or any of such financial assets. 


Virtual Asset Service Provider (VASP) - LCX


The next big thing about VAs is the virtual asset service providers. Therefore, get a clear understanding of the same through a brief discussion below. 

Who Are the Virtual Asset Service Providers? 

Virtual asset service providers are a group of organisations or individuals who work as the middlemen to administer exchanges and transfer of the VAs. Service providers of virtual assets have a critical role in the everyday exchange of VAs. 


The role of a virtual asset service provider defined by the Financial Action Task Force (FATF) is given below: 

  • They provide services involving the exchange of virtual assets into fiat currency for their clients 
  • They provide an exchange between various forms of virtual assets
  • They offer services to transfer VAs; ( Transfer of VAs means managing the transfer of the clients VAs from one account to another.)
  • They conduct safekeeping and management of VAs or any financial instruments enabling control over the virtual asset. 
  • They participate in or become a provision of financial services related to an issuer offer/or sale of a VA.

Given all these crucial roles, according to FATF, virtual asset service providers are one of the biggest mediums that can help deter financial crimes. Thus, learning how AML for virtual asset service providers is essential. 

AML Regulations For VASPs in The UAE

Given the growing popularity of investments in virtual assets, the governments of the UAE have issued regulations and regulatory authority to regulate the VASP market. They are: 

  • Appoint an officer to manage all the AML programs in the company
  • Maintaining all the security requirements in the level of ML ( money laundering) and TF (terrorist Financing) that is taking place in the present scenario.
  • Managing risk assessment and risk scoring for virtual asset service providers to accumulate any potential risk in the future.
  • Performing all the necessary due diligence that covers adequate customer screening.
  • Keeping up with all the blocked lists of customers provided by the UAE government. Thus, ensuring to report of any of such identity to the administration.
  • Providing necessary training sessions to all the employees and reporting any suspicious activity in real time.
  • Keeping well compliant with the latest AML regulations, screening programs, and guidelines updates.

The Effect of Not Complying With AML Regulations 

Due to a lack of proper awareness, VASPs who lack in terms of complying with the latest AML regulation is liable to legal penalties. They are also bound to experience many other legal troubles.


Thus, start hiring an AML officer to help you opt for quality AML solutions like AML-TRACE by SMART Infotech. Given this, VASPs can easily avoid any possible issues surrounding the lack of compliance with the latest AML regulations provided by the UAE government.