UK FCA Regulator Proposes Mandatory AML Data Reports from Cryptocurrency Firms

Lucas Cacioli  Aug 25, 2020 13:45  UTC 05:45

3 Min Read

The United Kingdom’s Financial Conduct Authority (FCA) has proposed an obligatory requirement for crypto exchanges in the UK to produce a report on anti-money laundering measures and data.

The UK’s Financial Conduct Authority (FCA) now wants crypto exchanges and crypto wallet custodians operating in the UK to provide more detailed information regarding money laundering risks.

The UK FCA regulator has put forward the proposal which is open to comment until November 23, 2020 and plans to publish a policy statement by the first quarter of 2021.

The FCA policy proposal published on Aug 25, is a plan by the UK financial regulator to impose obligatory AML reporting on digital asset firms and cryptocurrency wallet providers—a blanket-wide obligation for crypto exchanges large and small and “irrespective of their total annual revenue.”

FATF Recommends Extending AML Obligations to Crypto

In July 2016, the FCA introduced an annual financial crime reporting obligation for financial institutions on a range of indicators that reflect the potential money laundering risks of the firm services. The obligation to provide this financial crime information falls under the FCA’s Annual Financial Crime Report (REP-CRIM).

Based on the recommendations of the Financial Action Task Force (FATF)—an international body that sets global standards on combating money laundering and terrorist financing—the FCA now wants to extend the “the application of REP-CRIM to all firms we supervise.”

According to the proposal:

“We (FCA) consider that this approach will result in improving firms’ money laundering systems and controls, reduce actual risks of money laundering, and help improve the overall integrity of the UK financial system. It is also in line and builds on our data strategy, announced earlier this year, to use data and data analytics to transform the way we regulate and reduce the burden on firms.”

Under the new proposed rules, should they come into effect, crypto firms and cryptocurrency wallet custodians must provide information the FCA with information like the number of customers they serve in jurisdictions considered high risk and customers who refuse to comply and exit the services for suspicious reasons. This kind of AML information will be required by the FCA from crypto companies from their next “accounting reference date” after 10 January 2022.

The FCA also defined the term operates as “where the firm carries on its business or has a physical presence” as many cryptocurrency firms and custodians choose to register their business in tax haven territories such as the Cayman Islands.

UK FCA Grants First Crypto Licenses

As reported by Blockchain.News on August 21, the UK’s Financial Conduct Authority (FCA) has granted its first operating licenses for two crypto exchanges—one for Gemini and the other for Archax, officially making Archax the first regulated digital security exchange custodian and in the United Kingdom.

According to the FCA website, Archax and Gemini Europe Services were registered by the financial regulator on Aug. 18 and Aug. 19 respectively, after meeting the compliance standards of the authority.

The FCA implemented mandatory risk assessments for exchanges in January, to assess their compliance with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) regulations.



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