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Crypto Service Provider Compliance

Is it mandatory to hire a Compliance Officer for a VASP?

Yes, under NBG regulations, every VASP must appoint a dedicated Compliance Officer who passes the "Fit and Proper" test and is responsible for AML/CFT oversight.

What happens if I fail to report a suspicious transaction?

Failure to report suspicious transactions to the FMS can result in heavy fines (often starting from tens of thousands of GEL) and revocation of your VASP registration.

Do I need special software for transaction monitoring?

While not explicitly named by brand, the regulations require effective monitoring systems. Practically, using blockchain analytics tools (like Chainalysis or Elliptic) is necessary to meet NBG standards.

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Introduction: VASP Legal Status and Obligations

With the development of the digital economy in Georgia, the Virtual Asset Service Provider (VASP) has emerged as a new and significant player in the financial sector. A VASP is an entity that offers clients services for exchanging, transferring, safekeeping, or administering crypto assets. Under regulations effective from 2023, operating as a VASP requires not only a one-time registration with the National Bank but also continuous compliance with strict legal standards. This service involves ongoing legal support for VASPs to ensure smooth operations and avoid substantial fines prescribed by law.

Ensuring compliance is critical for any crypto business, as the National Bank conducts permanent monitoring. Any deviation from AML (Anti-Money Laundering) policies or reporting discipline can become grounds for revocation of registration. Our service helps companies maintain a "healthy" legal profile and implement best international practices in their operations.

What VASP Compliance Services Cover

This service covers all ongoing obligations that arise for a VASP in the post-registration period:

  • AML/CFT Monitoring: Continuous updating of the internal control system for preventing money laundering and terrorist financing, and real-time transaction monitoring.
  • Travel Rule Implementation: Complying with FATF Recommendation 16, which involves exchanging information accompanying crypto transfers with other providers.
  • Reporting Documentation: Preparing and submitting mandatory reports to the Financial Monitoring Service of Georgia (FMS), including Suspicious Transaction Reports (STRs).
  • Internal Audit: Conducting periodic legal audits to identify gaps in procedures before National Bank inspections.
  • Employee Training: Regular training of staff on regulatory updates so they can recognize "Red Flags."
  • KYC/KYB Optimization: Legal refinement of client identification and verification processes.

Common Scenarios and Use Cases

VASP compliance services are essential in the following situations:

  • Detecting a Suspicious Transaction: A client performs a large transaction with funds of unclear origin. The company needs legal advice on how to freeze the operation and report it to the FMS.
  • National Bank Inspection: The regulator conducts a scheduled or unscheduled inspection. Rapid mobilization of documentation and representation during the process is required.
  • Identifying Sanctioned Individuals: A client appears on an international sanctions list. Immediate asset freezing in accordance with legislation is necessary.
  • Launching a New Product: A VASP plans to add a new service (e.g., staking) and wants to assess its compliance with the existing license.

Georgian Legislation and Regulations

The sector is regulated by the Law of Georgia on Facilitating the Prevention of Money Laundering and the Financing of Terrorism, which defines VASPs as accountable entities. Detailed regulations are set out in the Order of the President of the National Bank of Georgia "On Approving the Rules for Registration, Deregistration, and Regulation of Virtual Asset Service Providers". Special attention is paid to "Know Your Customer" (KYC) standards and adherence to sanctions regimes. Any violation leads to severe administrative and financial liability.

Process of Working with a Specialist

Collaboration includes:

  1. Risk Assessment: Analyzing the company's current AML policy.
  2. System Setup: Providing software and procedural support for monitoring.
  3. Compliance Officer Support: Ongoing consultation for the company's compliance officer.
  4. Reporting: Preparing regular reports for the regulator.
  5. Inspection Management: Assistance during National Bank audits.

Why Choose Legal.ge?

VASP compliance isn't just about filling out forms; it is a complex technical-legal process. Legal.ge gives you access to experts with experience in both the banking and fintech sectors. Our specialists will help ensure your crypto business is secure, legal, and successful in the long term.

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