OSCE Extrabudgetary project
“Innovative policy solutions to mitigate money laundering risks of virtual assets” OSCE Extrabudgetary project “Innovative policy solutions to mitigate money laundering risks of virtual assets” What are virtual assets? funds into virtual assets, criminals Economic and Environmental Activities can break the link between the crime (OCEEA). The OCEEA works on Virtual assets are any digital and the funds, making it difficult promoting international co-operation representation of value that can be for law enforcement to trace the on economic issues, strengthening digitally traded, transferred or used for money’s origins. good governance and assisting the payment. They do not include digital OSCE participating States in combating representations of fiat currencies, • Fraud: Virtual assets are often targeted corruption, money laundering and the which are the official currencies of by scams and fraud schemes, such as financing of terrorism. governments. Examples of virtual assets phishing attacks, investment scams, include cryptocurrencies, non-fungible and pyramid schemes. These scams The engagement of the OSCE is based tokens (NFTs), and tokens that represent typically involve convincing victims on the mandate given to it by the ownership of real-world assets, such as to invest in virtual assets or provide participating States to promote good stocks or commodities. personal information that can be used governance and combat corruption, for financial gain. money laundering, and the financing of terrorism, as expressed in several Why virtual assets are • Cybercrime: Ransomware attacks, Ministerial Council Decisions and the becoming important? where hackers encrypt a victim’s data 2003 Maastricht Strategy Document and demand payment in virtual for the Economic and Environmental assets to unlock it, have become Dimension. The fast-evolving blockchain and increasingly prevalent. Virtual assets’ distributed ledger technologies have anonymity and borderlessness make The OSCE is tasked under Ministerial the potential to radically change the them appealing for ransom payments, Council Decision 2/03 to “work together financial landscape. But, their speed, as criminals can easily conceal their with the United Nations Office on Drugs global reach and above all - anonymity identities and receive the ransom and Crime Global Programme against - also attract those who want to escape without detection. Money Laundering and use its good authorities’ scrutiny. Since the origin of offices to promote the organization blockchain as we know it, virtual assets • Sanctions evasion: Criminals can of workshops on tackling money- have become widely available and have use virtual assets to circumvent laundering”, while the 2012 Dublin started to be used as payment products. international sanctions, transferring Ministerial Declaration on Strengthening However, without established regulation funds to and from sanctioned countries Good Governance and Combating and oversight, the sector is often still or individuals. The decentralized nature Corruption, Money-Laundering and referred to as the wild west of the finance of virtual asset networks makes it the Financing of Terrorism encourages industry.1 challenging to monitor and enforce the OCEEA “to support interested sanctions, allowing criminals to bypass governments and other relevant traditional financial restrictions. partners in implementing the FATF How criminals can Recommendations, including by building use virtual assets? capacity to conduct, and to contribute How does the OSCE and respond to, money-laundering and work to counter illicit financing-of-terrorism risk assessments.” Virtual assets can be used in various different ways by criminals, organized use of virtual assets The OSCE also promotes regional co- crime groups and other malefactors: operation as an essential way to address Preventing and combating money challenges posed by corruption. In this • Money laundering: Virtual assets laundering and terrorism financing endeavour, the OSCE co-operates with provide a convenient and opaque way remains among the key elements of the a wide range of stakeholders, including to launder proceeds from criminal OSCE’s comprehensive approach to state and local authorities, international activities such as drug trafficking, security and one of the main priorities and regional organizations, civil society fraud, and scams. By converting illicit of the Office of Co-ordinator of OSCE actors, social parties, the private sector,
1 Virtual assets: What, when, how ? Accessed January 3, 2024. https://www.fatf-gafi.org/content/dam/fatf-gafi/brochures/FATF-Booklet_VA.pdf. academia and think tanks. The OSCE Awareness-raising on risks Training on blockchain-based is part of international and regional fora related to virtual assets investigations and a member of expert working groups pertinent to its mandate and activities. In November 2022, the OCEEA In the beginning on 2023, the OCEE In particular, we co-operate closely with conducted 3 awareness-raising conducted 5 basic training courses (one other international organizations, such workshops for the representatives of four-day training for law enforcement and as UNODC, OECD, Financial Action relevant agencies in Tbilisi, Georgia, supervisory agencies of Georgia, one Task Force and Regional Anti-corruption in Chisinau, Moldova and with the three-day training for law enforcement Initiative among others. representatives from Ukraine in Vienna. agencies of Moldova, one three-day At the workshops, experts discussed training for supervisory agencies of The OSCE understands the importance the risks existing on the national virtual Moldova, one three-day training for of new technologies and how criminals assets markets, the money laundering law enforcement agencies of Ukraine, may use them for illicit purposes. potential of cryptocurrencies, relevant to one three-day training for supervisory Therefore, in 2022 the OCEEA started virtual assets regulations and legislation, agencies of Ukraine) on how to analyze to implement a project that aims to build and software tools required for and investigate money laundering crimes the capacities of national authorities to investigating illicit transactions conducted conducted with the use of virtual assets. counter the risks of criminal use of virtual in cryptocurrencies. assets in OSCE participating States.
OSCE/OCEEA Project on Innovative policy solutions to mitigate money laundering risks of virtual assets
The project directly addresses the issues of already existing, but poorly managed risks posed by the use of virtual assets for criminal purposes, in particularly money laundering and circumvention of international sanctions regimes. A total of 30 participants from the Participants had an opportunity to The ultimate objective is to build the Office of Prosecutor General, Financial get familiar with risks associated to capacities of national authorities to Monitoring Service, Ministry of Finance, cryptocurrencies, criminal schemes, as counter these vulnerabilities. Virtua Assets Service Providers well as tools for tracing different coins representatives and National Bank of and tokens. They also had opportunities In October 2022, the OSCE has initiated Georgia took part in the workshop in to review real-life case studies, learn the project with a kick – off meeting, Tbilisi. The workshop for Moldovan more about compliance of virtual assets which took place in Vienna, and gathered officials gathered 15 participants from service providers (VASP), try some of the government officials from relevant Financial Intelligence Unit, Moldovan specialized online tools for investigation agencies, central banks, supervisors of Banks Association, National Integrity of cryptocurrencies, and participate in financial markets and virtual assets from Authority, National Bank of Moldova, a practical simulation exercise on hacking Georgia, Moldova and Ukraine. In total, National Commission of Financial digital crypto-wallets and seizing criminal 20 participants attended the event: 5 Market, Ministry of Education and funds. from Georgia, 9 from Moldova and 6 Research, Office of Prosecutor from Ukraine. General, Ministry of Internal Affairs. The workshop for Ukrainian officials brought The kick-off meeting provided an together 20 participants from National opportunity for an interactive discussion Bank of Ukraine, Ministry of Finance, between experts and participants about Ministry of Digital Transformation, challenges of proper use of virtual assets, National Securities and Stock market current available tools to investigate illicit commission, Verkhovna Rada of transactions, as well as international legal Ukraine, National police of Ukraine, frameworks and national regulations. and National Anti-corruption Bureau of The OCEEA also presented the project Ukraine. essentials to participants.
At the end of 2023, 3 advanced training courses on virtual assets investigations were conducted, which were attended by more than 60 government officials from Georgia, Moldova and Ukraine to enhance their knowledge and skills in identifying and investigating financial crimes conducted with cryptocurrencies and other virtual assets. Elliptic that will allow relevant state strengthen their capacity to combat illicit agencies in Georgia, Moldova and activities. Ukraine to track and investigate illicit transactions conducted with the use of virtual assets. Workshop for legislators on drafting and reviewing the laws related to virtual assets Booklets on virtual assets At the end of 2022, a group of The OSCE/OCEEA prepared booklets experienced experts led and co- on criminal risks associated with virtual ordinated by a team leader under assets in national languages. These supervision of OSCE/OCEEA and booklets provide information on the UNODC reviewed the existing regulatory During the courses, participants learned different ways that criminals can misuse framework in Ukraine and provided about advanced techniques and virtual assets, as well as the steps that suggestions and recommendations practical tools to investigate financial individuals and organizations can take on possible amendments to comply crimes committed with virtual assets. to mitigate those risks. The booklets are with international standards and FATF The courses also equipped participants targeted to to law enforcement agencies recommendations. Recommendations with knowledge on advanced tracing and other relevant institutions that are contained practical advice on how to of criminal transactions on different responsible for preventing and detecting reduce gender gap in virtual assets and blockchains through case studies financial crime in countries-beneficiaries encourage more active participation of and best practices, and provided an of the project. women in this sector of economy. opportunity for participants to familiarize themselves with specialized analytics software. Workshops on Virtual Assets Service Providers regulatory framework
On the request of the Government of Georgia, the OCEEA conducted 2 workshops to assist the National bank of Georgia with the development of virtual assets service provider (VASP) regulatory framework, which country is required to adopt to meet the requirements of the FATF recommendation 15. Looking ahead
The interest in OCEEA’s project and Providing blockchain activities is steadily increasing. As part of analytical tool its ongoing expansion, the project is set to include eight new beneficiaries. This expansion also involves the introduction of new activities, with a heightened emphasis on promoting gender equality and increasing women’s participation. OSCE/ OCEEA remains committed to supporting With the aim of further ensuring participating states in their efforts to sustainability of project results and enhance capacities for countering illicit strengthening the capacities of relevant activities involving virtual assets. The government agencies to investigate The workshop provided participants evolving scope of the project reflects criminal activities conducted with the with the opportunity to enhance their a proactive approach to addressing use of virtual assets, the OSCE/OCEEA understanding of regulatory compliance emerging challenges and fostering provided a specialized software from in the cryptocurrency industry and inclusivity in the pursuit of its objectives.
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E-mail: virtualassets@osce.org
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