GRIDS holds stakeholder consultation on trafficking of dangerous substances through exploitation of virtual asset service providers (VASPs)
The Global Rapid Interdiction of Dangerous Substances (GRIDS) Programme of the International Narcotics Control Board (INCB) held a three-day virtual stakeholder consultation on trafficking of dangerous substances through exploitation of virtual asset service providers (VASPs) from 13 to 15 December 2022.
The meeting aimed to build on the success of the stakeholder consultation on trafficking of dangerous substances (new psychoactive substances and non-medical synthetic opioids along with their relevant precursors) through exploitation of e-wallet services, which was held virtually for six days from 22 February to 5 March 2021. The purpose of the 2021 consultation was to facilitate international public-private dialogue, raise awareness, and share knowledge and best practices to further enhance cross sector collaboration, and recommend future action to prevent the exploitation of legitimate e-wallet companies. Similarly, the recently-held consultation focused on discussing practical solutions and strategies to promote cooperation between governments and VASPs for the prevention of the exploitation of legitimate services of cryptocurrency exchanges and other blockchain technology companies for dangerous substance trafficking.
At least 40 representatives and experts from 11 governments, 1 international organization, 1 not-for-profit organization, 5 cryptocurrency exchanges, and 1 FinTech company were brought together in this meeting to share their respective experiences in preventing the misuse of legitimate cryptocurrency exchanges. The participants highlighted the problems associated with the lack of regulatory framework for VASPs in their countries as well as insufficient knowledge and capacity of the law enforcement and judicial officers in preventing the trafficking of dangerous substances by exploitation of VASPs. They also discussed the importance of promoting voluntary cooperation between governments and their private sector partners, as well as facilitating networking among the relevant experts and practitioners from the two sectors.
Highlighting the challenges posed by the threat of illicit financial flows, Mr. Stefano Berterame, Officer-in-Charge, INCB Secretariat, in his opening remarks at the commencement of the meeting on 13 December 2022, mentioned that such a threat had not only "compromised the integrity of financial system information" but had also "impeded the ability of financial institutions to monitor and assess the risk of processing online transactions related to the trafficking of dangerous substances." He complimented the GRIDS programme for bringing together various stakeholders from governments, private sector, and international organizations to promote and strengthen voluntary cooperation between governments and VASPs to address this issue of global concern.
The participants from the government shared the applicable regulatory framework for virtual assets (VAs) and VASPs in their respective jurisdictions; the investigative tools and resources they employ to identify unregistered/unlicensed cryptocurrency exchanges; challenges in implementing the Financial Action Task Force's (FATF's) "Travel Rule"; as well as their experiences in cooperating with the legitimate crypto exchanges to prevent dangerous substance trafficking. The participants from the private sector informed about the various ways in which they perform risk assessment of their services to prevent them being exploited by dangerous substance traffickers; the different techniques they use to monitor suspicious anomalous transactions involving the transfer of virtual currency related to dangerous substance trafficking (including the conversion of such virtual currency into fiat currency for channelizing into the legitimate economy); and how they communicate with the national agencies (law enforcement, regulatory bodies, financial intelligence units, etc.). The meeting concluded with the adoption of seven (7) practical recommendations to be implemented by participants, including establishing relationships between governments, private sector, and national/international industry associations of VASPs for the prevention of dangerous substance trafficking; and exchanging information on emerging risks associated with advancements in blockchain technology, such as decentralized applications (DApp), decentralized finance (DeFi), non-fungible tokens (NFTs), and unhosted wallets.
The GRIDS Programme is the International Narcotics Control Board´s global initiative addressing the international trafficking aspects of emerging dangerous substances. Launched in February 2020, the Programme contributes to the implementation of United Nations General Assembly Resolution 73/192, which calls for international cooperation to address and counter the world drug problem, by responding to requests by Member States to enhance their law enforcement capacity to detect and identify new psychoactive substances and promote information sharing and cross-border cooperation, and Commission on Narcotic Drugs Resolution 62/8. The GRIDS Programme also contributes to the 2030 Agenda, particularly the Sustainable Development Goals on good health and wellbeing, sustainable cities and communities, peace, justice and strong institutions, and partnerships.
The GRIDS Programme is supported by the Governments of Canada, Japan, and the United States. This event was made possible through generous support from the Government of Canada's Global Affairs Canada and Japan's Ministry of Foreign Affairs.
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