Rock

FATF: Report on Virtual Currencies (June 2014)

Virtual currencies are attracting more and more attention. Last week the FATF released a report on virtual currencies. Since we receive queries on virtual currencies regularly this report will be off interest other visitors of our site as well.

Over the last years virtual currencies (with Bitcoin attracting the most attention recently) have developed into a payment method with ever growing global acceptance. Virtual currencies offer an innovative, cheap and flexible method of payment. As with all innovations in the financial industry, the virtual currencies pose a challenge to regulators and tax departments (for example see Notice 2014-21 issued by the IRS) around the world, not sure on how to deal with this new payment method.  Responses to the virtual currency vary, where some countries embracing this new technology and others limiting or restricting its legitimate use.

We receive most questions on the AML impact of accepting / investing in virtual currencies and clearly so did the FATF. Consequently the FATF conducted research into the characteristics of virtual currencies to make a preliminary assessment of the ML/TF risk associated with this payment method. An important step in assessing the risks and developing an appropriate response, is to have a clear understanding of the various types of virtual currencies and how they are controlled and used.

FATF Report

The FATF released a their report: Virtual Currencies; Key Definitions and Potential AML/CFT Risks

The FATF also recognize the benefits of virtual currencies such as:

  • increased payment efficiency and lower transaction costs
  • facilitate international payments (regardless of opening hours of financial institutions)
  • have the potential to provide payment services to populations that do not have access or limited access to regular banking services

At the same time the FATF identifies potential AML risks associated with virtual currencies:

  • the anonymity provided by the trade in virtual currencies on the internet
  • the limited identification and verification of participants
  • the lack of clarity regarding the responsibility for AML compliance / supervision / enforcement for transactions
  • the lack of a central oversight body

The report provides a (i) brief introduction to virtual currencies (ii) explanation of the difference between convertible / non-convertible currencies (iii) explanation of centralized / non-centralized currencies and the second part of the report contains law enforcement examples of money laundering offences involving virtual currencies to demonstrate how this payment method has already been abused for money laundering purposes.

For those of you wondering what virtual currencies are all about and want to understand the risks a bit better the report makes interesting reading. We are following the development with great interest as we are of the opinion the virtual currencies are here to stay. We are all faced with the challenges that come with new technology and innovation in this area.

Rock

UK: FCA thematic review of AML and ABC of Asset Managers

The FCA Thematic Review of anti-money laundering and anti-bribery and corruption systems and controls in asset management companies was published recently. The FCA assessed 22 firms including wealth and asset management firms, fund administrators, and platform firms.

The FCA Thematic Review focused on:

  • AML systems and controls (including account opening, transaction monitoring, and suspicious activity reporting to mitigate money laundering risks)
  • ABC systems and controls (including the use of business introducers, third party payments and gifts/entertainment arrangements).
Rock

Argentina: New Argentine tax reform on capital gains and dividends

A new Argentine tax reform introduces significant changes to the income tax law regarding the taxation of dividends and capital gains in Argentina has come into force.

The foremost modifications announced by the reform include:

Capital gains

Before the reform, foreign parties (non-Argentine residents) were exempt from income tax on gains from the sale of shares, bonds and other securities. This tax reform eliminates this exemption, applying 15% income tax to net gains derived from such transactions.

For foreign beneficiaries, the net gain is assumed to be 90% of the gross sales price. This implies an effective tax rate of 13.5% of the gross sales price (15% x 90% assumed net income). Alternatively, the law gives the possibility of calculating the net income by deducting from the gross sales price the actual costs allowed under Argentine regulations (it is still to be clarified how this is to work in practice).

Rock

Switzerland: Media conference SFAMA – 5 Years after financial crisis

On 23 October 2013 the Swiss Fund & Asset Management Association (“SFAMA”) held an interesting media conference titled: Alternative Investments – 5 Years On From The Financial Crisis.

Introduction

The 2008 financial crisis fundamentally changed the hedge fund and private equity business, or private markets activities for short, confronting the market with new business models, risk premiums, return expectations, investment processes, and discerning client behaviour. Coupled with this, there are additional challenges stemming from the field of regulation.

Rock

Malta: MFSA published its AIFMD guidelines

To update you on the latest developments on the implementation of the Alternative Investment Fund Managers Directive (AIFMD), coming into force with effect from 22nd July 2013, the Malta Financial Services Authority (MFSA) has published self-assessment questionnaires on its website for fund managers and self-managed collective investment schemes.

Depending on the business model, Alternative Investment Fund Managers (AIFM) are requested to determine, by completing the questionnaires, whether it can categorized as 1) an AIFM which activities require it to be re-licensed or opts to be licensed as an AIFM in terms of the AIFMD or 2) an AIFM which does not intend to opt to be licensed as an AIFM in terms of the AIFMD.

Existing license holders have a one year transitional period with effect from 22nd July 2013 so as to register as an AIFM not needing to be re-licensed or to apply for a full AIFM license and satisfy the requirements of the AIFMD.

Rock

Cayman Islands: En route towards AIFMD Compliance

Since the proposed introduction of the AIFMD (“Alternative Investment Fund Managers Directive”) by the European Union in late 2010, CIMA (“Cayman Islands Monetary Authority”) has been actively involved in the process leading up to the implementation of this directive, which is due to become fully effective in July of 2013.

Rock

EU: AIFMD – status

Various clients have approached us with questions on the AIFMD (“Alternative Investment Fund Managers Directive) and therefore we want to provide a brief update here as well as some interesting links to EU documentation.

Rock

EU: Withholding tax reclaim

One of our clients approached us with the question if we could assist in assessing whether or not it was possible and/OR beneficial to his investors in his offshore funds to file a claim with the European Court of Justice (“ECJ”) for “discriminatory withholding taxes”. A topic that we felt would benefit more clients and their investors.

Rock

CH: VBK+CO will be speaker at annual meeting TTN

VBK+CO will be speaking at annual general meeting of TTN (“Transnational Taxation Network”) on 21 September 2012, to be held in Hotel de la Paix, Geneva, Switzerland.

The VBK+CO presentation will be on the much discussed topic: “Investment funds – Duties of the Board of Directors”. We will focus on organisation of investment funds and recent (legal) cases. Then we will take our experience and in combination with guidance from recent legal cases outline a list of requirements which we think are required in the current investment fund framework.

We will post a summary of the presentation on our VBK Blog after the meeting. If you are interested to receive more information or discuss the topic in more detail, please don’t hesitate to contact your account manager(s). Alternatively you can use our general e-mail address web.site@vbkservices.com or contact us via Twitter or Facebook.

About TTN ( http://www.ttn-taxation.net/ )

TTN is a multi-disciplinary association of tax, accounting and trust practitioners who have practical interest in international tax on a corporate and personal basis.

The objects of the association are to provide and share information and contacts between members in various international jurisdictions.

Meetings are organized at different international locations, providing opportunities for members to discuss matters of international tax. The meetings are part of the association’s educational support program, which also includes an active internet community and the issuance of newsletters.