The UK Financial Conduct Authority (FCA)’s recent anti-money laundering and counter-terrorist funding (AML/CTF) efforts have focused heavily on crypto.
The UK Treasury said in a May 1 report that the FCA considers crypto firms — like retail and wholesale banks and wealth management firms — to be “particularly vulnerable” to financial crime and at the highest risk for 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 toward supervising crypto businesses.
The agency’s financial crime specialists conducted 231 desk-based reviews and seven onsite visits. Other supervisory teams opened an additional 375 cases, which included 95 cases related to crypto.
The FCA extended new requirements to the crypto sector, including financial crime reporting (REP-CRIM) obligations. 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 to act as the AML supervisor for crypto businesses, including exchanges and custodial wallets, in January 2020. The latest report notes that the agency’s “robust assessment process” led to numerous rejections and withdrawals among applicants, improving confidence in companies that gained approval and demonstrated strong controls.
Broader UK crypto regulation
The latest report reviews past activities but also looks to the future.
Charlotte Vere, Baroness Vere of Norbiton, wrote that the FCA will soon announce details about the supervisory system’s future structure in light of a 2023 consultation. She said:
“We … are focused on delivering an ambitious and meaningful programme of changes to AML/CTF supervision.”
Changes in the area follow other regulatory and enforcement developments in the UK. In late April, UK police gained new powers to seize crypto, and in October 2023, the FCA introduced a strict crypto promotion and advertising regime.
The UK is also exploring more permissive policies, such as a regulatory sandbox, which permits companies to use digital ledger technology (DLT) under modified rules and regulations.
