AML & CFT Compliance Best Practices for Virtual Asset Service Providers (VASP)

As global regulatory expectations for Virtual Asset Service Providers (VASPs) continue to evolve, implementing a robust AML/CFT (Anti-Money Laundering and Countering the Financing of Terrorism) framework is no longer optional — it's essential.

Yet, as the volume and complexity of virtual asset transactions grow, identifying and managing suspicious activity becomes increasingly challenging.

To support compliance teams and risk monitoring units, the following guide presents a structured overview of key operational steps that VASPs should adopt as part of a modern AML/CFT compliance program.

1. Detection of Suspicious Transactions

Utilize automated tools and transaction monitoring systems to detect activity that exceeds defined thresholds or matches known risk indicators.

This is commonly referred to as Know Your Transaction (KYT).

2. Preliminary Review

Compliance analysts should examine alerts triggered by the system, reviewing transaction type, volume, frequency, and associated wallet behavior.

3. Risk Assessment

Based on the initial review, assess exposure by analyzing wallet history, user profile, past behavior, and contextual data to determine the level of risk involved.

4. Reassessment of Wallet/User Profile

If necessary, re-evaluate the customer's KYC profile and wallet behavior to reflect updated risk information, and make required updates to customer due diligence records.

5. Investigation & Analysis

For higher-risk or complex cases, conduct a deeper investigation — collecting additional information where needed to validate or dismiss the suspicion.

6. Documentation

Thoroughly document all steps of the case:

• Why the transaction was flagged
• What risks were identified
• What mitigation actions were taken

This supports case management and future audits.

7. Decision & Reporting

Based on the findings, determine whether the case qualifies as a Suspicious Activity Report (SAR). If so, report it to the relevant Financial Intelligence Unit (FIU) and other authorities if necessary. Also, decide whether the transaction should be allowed, blocked, or escalated.

8. Process Improvement

If a transaction was flagged but later deemed non-suspicious, update your rules or detection logic to reduce false positives and enhance system efficiency.

9. Training & Feedback Loop

Invest in regular training and leverage feedback from monitoring systems to keep your team informed and proactive regarding evolving risks and behavioral patterns.

10. Recordkeeping

Maintain detailed records of monitoring processes, investigations, decisions, and reports — in line with applicable regulatory requirements and audit expectations.

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