The UK Financial Conduct Authority’s (FCA) recent anti-money laundering and anti-terrorist financing (AML/CTF) efforts have focused heavily on crypto.
The UK Treasury said in a May 1 report that the FCA considers crypto companies – such as retail and wholesale banks and asset managers – to be “particularly vulnerable” to financial crime and at greatest risk of exploitation through money laundering.
Increased focus
The report highlighted that the FCA has increased its focus on the crypto industry in recent years. In 2022 and 2023, the FCA dedicated the equivalent of 52.8 full-time financial crime specialists to AML/CTF, while 15.8 full-time employees, or 30%, were allocated to overseeing crypto firms.
The agency’s financial crime specialists conducted 231 desk investigations and seven site visits. Other supervisory teams opened another 375 cases, including 95 cases related to crypto.
The FCA extended new requirements to the crypto sector, including financial crime reporting obligations (REP-CRIM). It used REP-CRIM data with other information, including but not limited to crypto-blockchain analytics, for improved risk identification and targeted interventions.
The FCA began acting as an AML regulator for crypto companies, including exchanges and custodial wallets, in January 2020. The latest report notes that the agency’s “robust review process” has led to numerous denials and withdrawals among applicants, reducing confidence in companies seeking approval and demonstrating strong controls.
Wider UK crypto regulation
The latest report provides an overview of past activities, but also looks to the future.
Charlotte Vere, Baroness Vere of Norbiton, wrote that the FCA will soon announce details on the future structure of the supervisory system in light of a consultation in 2023. She said:
“We… are focused on delivering an ambitious and meaningful program of changes to AML/CTF supervision.”
Changes in this area follow other regulatory and enforcement developments in Britain. At the end of April, British police were given new powers to seize crypto, and in October 2023 the FCA introduced a strict crypto promotion and advertising regime.
Britain is also exploring more permissive policies, such as a regulatory sandbox, which would allow companies to use digital ledger technology (DLT) under changed rules and regulations.