The Impact of FCA Oversight

Regulatory Requirements For Cryptoasset Firms

Forensic & Litigation Consulting | Financial Services

August 24, 2020

Since 10 January 2020, cryptoasset firms have been required to build and maintain anti-money laundering (AML) and counter-terrorist financing (CTF) frameworks to comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. Furthermore, all existing cryptoasset firms are required to register with the Financial Conduct Authority (FCA) by 30 June 2020 and all new firms cannot conduct business until registration is confirmed.

Background to the regulation

Cryptocurrencies, as with other speculative assets, are vulnerable to financial crime and have therefore been brought under the scope of regulation to protect consumers and the wider market in the UK. The new regulatory guidelines mean that appropriate steps should be taken to mitigate risks, proportionate to the size and nature of business activities.

Who is in scope?

The legislation broadly categorises cryptoasset firms into two categories – cryptoasset exchange providers and custodian wallet providers. The definitions are drafted sufficiently widely to bring in scope all firms and sole traders that are providing services for profit.

What is an AML/CTF framework?

An AML/CTF framework is a formal oversight and control structure that provides the tools for a firm to identify, understand and respond to its financial crime risks. The FCA provides guidance on the components of an AML/ CTF framework to ensure that firms understand the core expectations when implementing their own.

A framework that has been clearly documented provides transparency and structure against which to develop and maintain consistency of approach to managing financial crime risks. A framework should incorporate the business model and objectives of the firm, along with the vision of senior management, so that the risk appetite is clearly articulated.

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