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The role of a VFA Agent is regulated by Article 7 (Issuing of ICO) and Article 14 (Application of a service licence) of the VFA Act. The main role of the VFA agents is twofold i.e. to act as a guide to the ICO issuer or VFA service provider applicant, but also to act as a first filter for the regulator and be a point of liaison between MFSA and client.
Moreover, the VFA agent has a pivotal role to play in the AML/KYC process being a subject person for PMLFTR. Therefore, the VFA Agent as part of the AML/CFT obligations is to ensure that with regards the client there is proper identification and verification; ongoing monitoring; know well the source of funds/wealth (especially if this source is crypto currencies).
The definition of a VFA agent in the VFA Act:-
"VFA agent" means a person registered with the competent authority under this Act and authorised to carry on the profession of:
(a) advocate, accountant or auditor; or
(b) a firm of advocates, accountants or auditors, or corporate services providers; or
(c) a legal organisation which is wholly owned and controlled by persons referred to in paragraphs (a) or (b), whether in Malta or in another recognised jurisdiction, or any other class of persons holding authorisations, qualifications and, or experience deemed by the competent authority as possessing suitable expertise to exercise the functions listed under articles 7 and, or 14;
In the case of ICO issuers, the VFA Agent shall be required to prepare and submit to the MFSA, on an annual basis, a Compliance Certificate in relation to the Issuer. Provided that where there have been any breaches of the Act, the Regulations or these Rules, the VFA Agent is required to include a statement regarding such breaches in the Compliance Certificate. The Compliance Certificate should further include a confirmation that:
(i) All the local AML/CFT requirements have been satisfied, which confirmation should be obtained from the Issuer’s MLRO ; and
(ii) the Issuer’s Innovative Technology Arrangement complies with any qualitative standards set and guidelines issued by the Malta Digital Innovation Authority applicable to the particular type of arrangement (irrespective of whether the said arrangement holds a certification or a ruling of eligibility under the Innovative Technology Arrangements and Services Act), which confirmation should be obtained from the Issuer’s Systems Auditor .
A VFA Agent must maintain adequate Due Diligence Systems (higher level than for traditional finance) with a robust KYC and cyber security systems and controls. It must ensure that it has in depth knowledge on different business models of the ICO issuers it wishes to represent. At the end of the day a VFA agent is liable for Administrative penalties of up to 150,000 EUR for each infringement and in case of a convicted criminal offence liable to 500,000 EUR fine and/or imprisonment of up to six months.
Thus it is Important that a VFA agent keeps extensive record keeping, especially for the annual certificate and to back up the Financial Instrument test, which has to be confirmed by VFA agent.