AML/CFT for Cryptoassets



The UK’s financial regulator, the Financial Conduct Authority (‘the FCA’), shall begin to provide Anti-Money Laundering and Counter Terrorist Financing supervision (‘AML/CFT supervision’) to cryptoassets issued in the UK. It was recognised by the FCA that the cryptoassets industry has the potential to facilitate money laundering and terrorist financing, and thus poses a lot of risks to different types of entities, such as banks, building societies and credit unions which fall under the FCA’s supervision.

The Approach

The FCA has noted the advancements made with regards to AML/CFT prevention and supervision, both locally and on an international level. It considers these advancements as necessary for the supervision of cryptoassets, and shall use the following steps taken by other entities as an example for their way forward: 

  • The Financial Action Task Force (‘the FATF’) made some changes to its recommendations and extending its global AML standards to cover cryptoassets; 
  • The EU’s 5th Money Laundering Directive (‘the 5MLD’) which shall be implemented all across the Member States, and address the risks posed by virtual assets; 
  • The UK Cryptoassets Task Force took a broader approach to cryptoassets and recognised that cryptoassets have high risks of being used for illicit activities, and pose risks to consumers and the market in general. 

The FCA goes on to list the different types of activities which it recognises as falling within the scope of various money laundering regulations. These activities include the following: 

  • Cryptoassets exchange providers; 
  • Cryptoassets automated teller machine (ATM);
  • Custodian wallet providers; 
  • Peer to peer providers; 
  • Issuers of new cryptoassets; 
  • Publication of open-source software. 

Additional Requirements 

The FCA provides for additional requirements for any person or entity seeking to carry out any of the activities which fall within the scope of money laundering regulations . All businesses conducting the above-mentioned activity shall be obliged to comply with such regulations from January 2020, irrespective of them being registered or otherwise.

As of January 2020, the first requirement is that of registrationPersons or entities seeking to carry out any of the activities listed above, shall be obliged to register with the FCA prior to commencing their activities. The registration shall be limited to registration enforcement only, and the customers shall not benefit from this registration and shall not have access to the Financial Ombudsman Services. This obligation must be satisfied by both new cryptoassets businesses and those already carrying out specified activities. Applications for registrations shall be analysed carefully by the FCA to ensure that all the conditions for registration have been satisfied by the said crypto businesses. The latest date by which applications may be received shall be that of June 2020.

The timeline of application after the registration stage shall be as follows: 

  1. The FCA will request further information if it deems necessary; 
  2. The 3-month period will start, in which registration assessments shall be made so that the FCA could analyse whether the application meets all the conditions for registration; 
  3. The registration fee is paid; 
  4. Businesses which have not satisfied conditions outlined in points 1 - 3 shall cease trading. 

The FCA specifies that businesses which pose a higher degree of risk than other entities for AML/CFT shall receive a higher level of supervisory focusIn the event that the FCA suspects that the business has engaged in misconduct, an enforcement investigation may be carried out on that business. 

The businesses are also required to demonstrate that they have the necessary controls, procedures and policies in place that effectively manage AML/CFT risks. These shall be considered as part of the supervisory assessments conducted by the FCA.


The FCA shall have enforcement as one of their regulatory tools. These enforcement powers were set out by the Enforcement Guide, which denotes the extent to which such powers may be exercised, including the investigation powers afforded to the FCA. The contemplated money laundering regulations shall, in the near future, include provisions which cater for enforcement powers for businesses of cryptoassets.

In conclusion, the FCA seeks to address the AML/CFT risks by tightening their supervisory grip on businesses trading in the UK’s crypto industry. The FCA will thus include the risks of cryptoassets into their own money laundering regulations and set out the businesses’ requirements for them to satisfy before these businesses can commence their trading.


Cryptocurrency Regulation