Crypto firms failing to meet AML standards, says FCA

The Financial Conduct Authority (FCA) has said that a significant number of firms are withdrawing their applications, as result of not being able to meet its anti-money laundering (AML) standards.

The FCA is set to extend the end date of its temporary registrations scheme for existing cryptoasset businesses from 9 July 2021 to 31 March 2022.

This will allow existing cryptoasset firms that applied for registration before 16 December 2020, and whose applications are still being assessed, to continue trading.

The regulator also warned investors that it does not have consumer protection powers for the cryptoasset activities of firms, and that “if consumers invest in cryptoassets, they should be prepared to lose all their money.”

In addition, the FCA said that it is unlikely that consumers will have access to the Financial Ombudsman Service or Financial Services Compensation Scheme, irrespective of whether a firm has temporary or full registration.

Cryptocurrencies are commonly used by organised crime as part of money laundering operations, research by blockchain analysis firm ChainLink found that 1,867 cryptowallet addresses received around $1.7 billion of criminal-linked money in 2020.

The FCA’s warning comes after The Crown Prosecution Service (CPS), the principal public agency for conducting criminal prosecutions in England and Wales, said it is preparing for a rise in the number of prosecutions related to cryptocurrency scams in May.

The Bank of England’s Andrew Bailey also said that cryptocurrencies and similar digital assets are a danger to the public in the same month.

“While this is not the only element that the FCA will assess in relation to an applicant, the FCA will only register firms where it is confident that processes are in place to identify and prevent this activity,” said the FCA in a statement.

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