A new report from the UK Treasury has drawn attention to the increased risk of cryptocurrency transactions between 2022 and 2023 being money laundering activities. This comes as UK regulatory agencies ramp up efforts to tackle financial crimes in the crypto sphere.
The report, which was about the Treasury supervisory update on anti-money laundering and counter-terrorist financing, flagged cryptocurrency firms alongside retail banking, wholesale banking, and wealth management as sectors most vulnerable to exploitation by money launderers during that period.
However, the report highlighted the rigorous approach taken by the Financial Conduct Authority (FCA), the UK’s top financial regulator, in assessing cryptocurrency businesses: “As part of the FCA’s risk-based approach,” the report states, “it applied a robust assessment process at the registration gateway for these businesses, and identified significant weaknesses in firms’ controls, resulting in a large number of firms withdrawing their applications or being rejected or refused by the FCA.”
The FCA played a crucial role in assessing risks among 238 firms during this timeframe. The report noted that the regulator has been intensifying efforts to ensure compliance with anti-money laundering regulations among crypto businesses since 2020 and has dedicated significant resources to supervisory initiatives. The regulator has over 52 specialists dedicated to anti-money laundering supervision, and 15 are focused on the crypto sector.
Moreso, the proactive measures are taken by UK police against crypto-related criminal activities.were also highlighted. In October 2022, the National Police Chiefs’ Council rolled out crypto tactical advisors nationwide to aid in seizing digital assets associated with criminal endeavours. According to the report, these efforts resulted in the successful confiscation of hundreds of millions of dollars worth of cryptocurrency.
Significantly, the UK government has been actively engaged in regulatory measures and fostering opportunities in the emerging financial sector of digital assets. In a recent move, the Bank of England (BoE) and the Financial Conduct Authority (FCA) jointly proposed the establishment of a Digital Securities Sandbox (DSS) in April 2024. This initiative is poised to empower financial market participants to leverage cutting-edge technology in trading and settling digital securities such as shares and bonds.
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