The rapid rise of cryptocurrencies has brought unprecedented opportunities for innovation within the financial industry, but it has also created ground prolific for financial crime. Recent actions by the United Kingdom’s Financial Conduct Authority (FCA) and the European Union’s (EU) newly established Anti-Money Laundering Authority (AMLA) reflect the regulatory urgency to address the risks posed by cryptoassets. From arrests in London to warnings from EU regulators, authorities are intensifying efforts to bring Crypto-Asset Service Providers (CASPs) into compliance with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) regulations. These developments highlight the challenges of regulating a decentralised, borderless financial ecosystem and the need for greater degrees of oversight to protect consumers and curb illicit activity.
UK Enforcement: FCA and Police Crack Down on Unregistered Crypto Operators
In a recent joint operation, the FCA and the Metropolitan Police Service arrested two individuals in southwest London on suspicion of money laundering and operating an unregistered cryptoasset exchange. The operation included searches of four premises, during which seven illegal cryptocurrency ATMs were seized. In the UK, operating a crypto ATM or exchange without FCA registration is a criminal offense under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017.
Therese Chambers, the FCA’s executive director of enforcement and market oversight, emphasised the authority’s stance: “If you are operating a crypto ATM or exchange illegally, then you should expect serious consequences.” She noted that no legally operated crypto ATMs currently exist in the UK, which means that using one supports criminal activity.
FCA’s Strategic Focus on Cryptoasset Supervision
This operation reflects broader concerns about the misuse of cryptocurrencies. Since 10 January 2021, UK-based firms providing cryptoasset services have been required to register with the FCA and comply with stringent AML and CFT requirements. The FCA’s enforcement actions demonstrate a targeted approach, pursuing unregistered operators and illegal infrastructure such as crypto ATMs, which are often exploited for money laundering due to their accessibility and capacity for anonymity.
EU Oversight: AMLA’s Warning and Regulatory Priorities
Across the Channel, the EU’s AMLA has issued a stern warning regarding the money laundering risks associated with cryptocurrencies. Bruna Szego, Chair of AMLA, emphasised that CASPs are exposed to “significant money laundering and terrorist financing risks” due to the inherent features of cryptocurrencies, including cross-border operability and anonymity-enhancing capabilities.
AMLA has prioritised the supervision of CASPs as a strategic focus, seeking to ensure these providers are aligned with the EU’s AML and CTF regulatory framework. The EU authority’s concerns are not limited to operational risks; they extend to geopolitical issues, such as the reported use of stablecoins by Russia to evade sanctions. Members of the European Parliament have called for action to address this issue, further highlighting the global implications of unregulated crypto activity.
Crypto’s Dual Nature: Innovation and Illicit Use
Technological features such as pseudonymity, decentralised ledgers and seamless cross-border transactions make cryptocurrencies attractive to bad actors. While blockchain transparency can aid forensic investigations, privacy-enhancing features, including mixing services and privacy coins, can obscure transaction trails, impeding efforts to trace illicit funds.
AMLA’s focus on CASPs reflects the wider initiative by global regulators to target the intermediaries that facilitate crypto transactions, such as exchanges, wallet providers and ATM operators. These entities are critical checkpoints where regulators can enforce compliance, ensuring that transactions are monitored and suspicious activities reported.
Toward Harmonised Regulation: A Coordinated Global Effort
The FCA’s and AMLA’s actions are also part of a broader trend toward stricter regulation of the crypto industry as a whole. In the UK, the FCA has been vocal about the risks posed by unregistered operators. Similarly, AMLA’s proactive stance signals a shift toward harmonious regulation across the EU, with the agency working to align CASPs with existing financial regulations. Cryptocurrencies operate across borders, requiring coordinated efforts between national regulators, law enforcement and international bodies like AMLA.
Public sentiment surrounding cryptocurrencies remains mixed. Some view them as the currency for criminals, calling for regulators and governments to discourage their use, while others embrace the legitimate applications of blockchain technology. Regulators across the globe face the delicate task of balancing innovation with security, ensuring that the benefits of cryptocurrencies are not overshadowed by their potential for misuse.
The Road Ahead for Crypto Regulation
The road ahead for crypto regulation is complex. The FCA’s enforcement actions and AMLA’s strategic focus demonstrate a commitment to tackling money laundering and terrorist financing risks. However, the decentralised nature of cryptocurrencies and the rapid pace of technological innovation pose ongoing challenges. Regulators must adapt to new tools, such as privacy-enhancing technologies, while increasing international cooperation to address cross-border risks to ensure that cryptocurrencies can coexist with a secure and transparent financial system.
How Complyport Can Help
The recent enforcement activity by the FCA and the warnings issued by AMLA underscore the significant money laundering and terrorist financing risks posed by cryptoasset service providers.
At Complyport, our team of regulatory experts can help your firm navigate the evolving compliance landscape. We offer comprehensive support in assessing your exposure to AML and CTF risks and in developing robust frameworks that meet FCA and EU regulatory expectations.
Our services include:
- FCA Crypto Registration Support: We provide end-to-end support for firms seeking registration with the FCA under the Money Laundering Regulations. Our specialists assist with preparing documentation, demonstrating effective AML/CTF controls and responding to regulatory feedback to maximise your chances of a successful application.
- AML/CTF Framework Development: We help firms develop, implement and maintain robust AML and counter-terrorist financing frameworks that meet FCA and EU expectations.
- Regulatory Horizon Scanning: We deliver tailored regulatory insights specific to the crypto sector, helping you stay ahead of legislative changes, enforcement trends and policy developments from the FCA, AMLA and other global regulators. This service supports proactive compliance planning and reduces regulatory risk exposure.
Contact Us
For more information on strengthening your AML/CTF frameworks or ensuring compliance with FCA and AMLA regulations, contact our team today to book a meeting with one of our Subject Matter Experts.
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