On-shore VASP in Papua New Guinea

Currently, neither a specific registration nor a licensing regime exists for VASPs.

Anticipated Future: Based on FATF recommendations, it is highly probable that PNG will eventually adopt a licensing regime for VASPs. The FATF standards recommend that VASPs be licensed or registered, and subject to effective systems for monitoring and ensuring compliance with AML/CTF requirements. Licensing typically implies a more rigorous pre-approval process and ongoing supervision than simple registration.

Bank of Papua New Guinea (BPNG): BPNG has previously issued warnings to the public regarding the risks associated with cryptocurrencies, including volatility, lack of consumer protection, and potential use for illicit activities. These warnings do not constitute a regulatory framework but indicate a cautious approach.

Financial Analysis and Supervision Unit (FASU): As the AML/CTF regulator, FASU is responsible for ensuring compliance with the Anti-Money Laundering and Counter Terrorist Financing Act 2015. While VASPs are not explicitly listed as "reporting entities" under this Act yet, the FATF standards imply that they should be.

AML/KYC (Anti-Money Laundering / Know Your Customer): This is the most certain requirement. Future regulations will mandate VASPs to:

Identify and verify customers (KYC).

Conduct ongoing customer due diligence.

Monitor transactions for suspicious activity.

Report suspicious transactions to FASU.

Implement robust risk-based AML/CTF programs.

Adhere to the "travel rule" for VA transfers, requiring information sharing between VASPs.

Local Presence: For foreign entities, a local physical presence, a local board of directors, or a local registered company structure is often a requirement for financial licenses.

Management & Governance: Fit and proper tests for directors and senior management, robust governance structures, internal controls, and risk management frameworks (including cybersecurity).

Capital Requirements: Financial institutions, including future VASPs, are typically required to maintain a certain level of minimum paid-up capital to demonstrate financial stability and ability to absorb losses. The exact amount would be determined by BPNG based on the scope and risk of services offered.

Pre-Application Consultation: Discussion with BPNG/FASU.

Submission of Application: Detailed business plan, legal structure, ownership details, management profiles, capital adequacy proof, AML/CTF policies, risk management framework, technology infrastructure details.

Due Diligence & Assessment: BPNG/FASU would review the application, conduct interviews, and assess the suitability of the applicant.

Fit and Proper Checks: For all key personnel.

No, not fully adopted for VASPs/Travel Rule. PNG's Anti-Money Laundering and Counter Terrorist Financing Act 2015 (AML/CTF Act 2015) and its associated Regulations 2016 do not comprehensively define Virtual Assets (VAs) or Virtual Asset Service Providers (VASPs) in line with FATF Recommendation 15.

Consequently, VASPs are not explicitly designated as "reporting entities" or "financial institutions" under the current AML/CTF framework. This means they are generally not subject to AML/CTF obligations, including the Travel Rule.

The APG MER specifically notes that PNG needs to take steps to license or register VASPs and subject them to the full range of AML/CTF obligations.

Bank of Papua New Guinea - Public Notice on Digital Currencies, Virtual Assets and Cryptocurrencies (PDF)

Date: August 12, 2021 (The most prominent public warning in recent years)

Anti-Money Laundering and Counter Terrorist Financing Act 2015 (AML/CTF Act 2015): This Act provides the legal basis for identifying, freezing, and confiscating assets related to money laundering and terrorist financing. It obligates financial institutions and designated non-financial businesses and professions (DNFBPs) to implement AML/CTF measures. While it pre-dates specific crypto regulation, its broad definitions and principles are applied to virtual asset activities where deemed appropriate by regulators.

Financial Analysis and Supervision Unit (FASU): As the FIU, FASU issues guidance, receives suspicious transaction reports (STRs), and disseminates information regarding designated persons and entities subject to sanctions.

Designated Person/Entity Screening: VASPs must screen their customers (both at onboarding and on an ongoing basis) against the UN Consolidated Sanctions List, which includes individuals and entities designated under various UN sanctions regimes (e.g., terrorism, proliferation, specific country regimes).

Asset Freezing: If a VASP identifies that it holds assets (including virtual assets) belonging to a designated person or entity, it must immediately freeze those assets and report the match to FASU.

Prohibition on Dealing: VASPs are prohibited from making funds or economic resources available to, or for the benefit of, designated persons or entities.

Suspicious Transaction Reporting (STR): Any transaction involving designated persons, or transactions suspected of being related to money laundering or terrorist financing, must be reported to FASU.

Extraterritorial Reach: OFAC and EU sanctions can have extraterritorial effects, particularly if transactions involve:

Reputational Risk: Failing to comply with major international sanctions regimes like OFAC or EU can lead to severe reputational damage, de-risking by international partners, and exclusion from global financial systems.

PNG does not impose a general Capital Gains Tax.

Income from Business Activities: If an individual or entity is regularly trading cryptocurrency, mining crypto as a business, operating a crypto exchange, or providing services in exchange for crypto, the profits derived would be considered assessable income.

No Specific Crypto GST Rules: There are no specific GST rules for cryptocurrency in PNG.