FCA new money laundering and terror funding watchdog

The UK’s Financial Conduct Authority (FCA) is now the anti-money laundering and counter terrorist financing supervisor for businesses carrying out cryptoasset activities.

Any UK business conducting specific cryptoasset activities falls within the scope of the amended Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs).

The MLRs set out additional obligations of private sector firms working in areas of higher money laundering risk.

They aim to stop criminals using professional services to launder money by requiring professionals to take a risk-based approach.

The FCA now requires cryptoasset businesses to:

• Identify and assess the risks of money laundering and terrorist financing which their business is subject to.
• Have policies, systems, and controls to mitigate the risk of the business being used for the purposes of money laundering or terrorist financing.
• Undertake customer due diligence when entering into a business relationship or occasional transactions.
• Apply more intrusive due diligence, known as enhanced due diligence, when dealing with customers who may present a higher money laundering or terrorist finance risk.
• Undertake ongoing monitoring of all customers to ensure that transactions are consistent with the business’s knowledge of the customer and the customer’s business and risk profile.

A spokesperson said: “We will proactively supervise firms’ compliance with the new regulations, and will take swift action where firms fall short of desired standards and cause risks to market integrity.”

New companies carrying out cryptoasset activity must now be registered with the FCA before conducting business.

In July, the FCA proposed a ban on cryptocurrency derivatives platforms like BitMEX.

The regulator cited “extreme volatility” as a reason for cryptocurrencies being “ill-suited” to smaller retail investors.

The statement claims that retail investors “cannot reliably assess the value and risks of derivatives or exchange traded notes (ETNs) that reference certain cryptoassets”.

It continued: “We estimate the potential benefit to retail consumers from banning these (derivative) products to be in a range from £75 million ($94 million) to £234.3 million ($305 million) a year.”