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UK Financial Conduct Authority’s Focus on Anti-Money Laundering and Counter-Terrorist Funding in Crypto Sector
The UK Financial Conduct Authority (FCA) has intensified its efforts in combating money laundering and counter-terrorist funding within the cryptocurrency industry. According to a recent report released by the UK Treasury on May 1, the FCA has identified crypto firms as particularly vulnerable to financial crime, placing them at a high risk of exploitation through money laundering.
Increased Regulatory Focus
Over the past years, the FCA has significantly ramped up its scrutiny of the crypto sector. The report revealed that the FCA assigned 52.8 full-time financial crime specialists to anti-money laundering and counter-terrorist funding efforts in the years 2022 and 2023. Additionally, 30% of the agency’s workforce, amounting to 15.8 full-time employees, were dedicated to supervising crypto businesses.
Financial crime specialists from the FCA conducted a total of 231 desk-based reviews and carried out seven onsite visits. Concurrently, other supervisory teams opened 375 cases, of which 95 were related to cryptocurrency. The FCA introduced new regulatory requirements for the crypto industry, such as financial crime reporting (REP-CRIM) obligations. By leveraging REP-CRIM data alongside crypto blockchain analytics, the FCA aimed to enhance risk detection and implement targeted interventions.
Beginning in January 2020, the FCA assumed its role as the anti-money laundering supervisor for crypto businesses, including exchanges and custodial wallets. The most recent report highlighted the agency’s stringent assessment process, resulting in several rejections and withdrawals from applicants. This approach bolstered confidence in approved companies that demonstrated robust controls.
Future Regulatory Developments
In addition to reviewing past activities, the report also outlined future initiatives in the regulatory landscape. Charlotte Vere, Baroness Vere of Norbiton, stated that the FCA intends to unveil details regarding the restructuring of the supervisory system following a consultation held in 2023. She emphasized the agency’s commitment to implementing an ambitious and impactful program of changes for anti-money laundering and counter-terrorist funding supervision.
These regulatory efforts coincide with other advancements in the UK, including new legislation granting law enforcement authorities enhanced powers to seize cryptocurrency. Furthermore, the FCA recently established a stringent regime governing the promotion and advertisement of crypto assets in October 2023.
Moreover, the UK is actively exploring more lenient policies, such as the implementation of a regulatory sandbox. Through this initiative, companies can harness digital ledger technology (DLT) while adhering to modified regulations, enabling innovation within a controlled environment.
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