The UK Financial Conduct Authority (FCA) has intensified its efforts against money laundering and counter-terrorist financing (AML/CTF), with a significant focus on cryptocurrency.

According to a report released by the UK Treasury on May 1, the FCA views crypto firms, including retail and wholesale banks, and wealth management firms, as particularly susceptible to financial crime and high-risk targets for money laundering exploitation.

Ramped-up attention

The report underscores the heightened scrutiny the FCA has placed on the crypto sector in recent years. Between 2022 and 2023, the FCA allocated the equivalent of 52.8 full-time financial crime specialists to AML/CTF, with 15.8 full-time employees, or 30%, dedicated to overseeing crypto businesses.

During this period, financial crime specialists at the agency conducted 231 desk-based reviews and seven onsite visits, while other supervisory teams initiated an additional 375 cases, including 95 cases related to crypto.

The FCA introduced new obligations for the crypto industry, such as financial crime reporting (REP-CRIM) requirements. It utilized REP-CRIM data alongside other sources, including crypto blockchain analytics, to enhance risk assessment and implement targeted interventions.

Since January 2020, the FCA has served as the AML supervisor for crypto businesses, including exchanges and custodial wallets. The latest report highlights the agency's rigorous assessment process, resulting in numerous rejections and withdrawals among applicants, thereby instilling confidence in approved companies that demonstrate robust controls.

Expanding UK crypto regulations

While the report reviews past actions, it also outlines future initiatives.

Charlotte Vere, Baroness Vere of Norbiton, stated that the FCA will soon unveil details about the future structure of the supervisory system following a 2023 consultation. She emphasized the agency's commitment to implementing significant changes to AML/CTF supervision.

These developments coincide with other regulatory and enforcement measures in the UK. In late April, UK police were granted enhanced powers to seize cryptocurrency, and in October 2023, the FCA introduced a stringent regime for crypto promotion and advertising.

Furthermore, the UK is exploring more lenient policies, such as a regulatory sandbox, allowing companies to utilize digital ledger technology (DLT) under modified regulatory frameworks.