To offer cryptocurrency services in the UK, you must register with the FCA under their cryptoasset AML/CTF Registration, formerly known as the FCA AML/CTF Cryptoasset Registration regime. Starting from January 10, 2020, crypto businesses in the UK are required to obtain the FCA’s UK crypto license, and the FCA has become the regulatory authority for anti-money laundering and counter-terrorist financial (AML/CTF) oversight of UK-based crypto businesses, following the 2017 Money Laundering, Terrorist Financing, and Transfer of Funds Regulations.
How Does the FCA Define a Cryptoasset Within its Cryptoasset Registration Framework?
A cryptoasset is a digitally secured representation of value or contractual rights that employs distributed ledger technology for electronic transfer, storage, or trading. This can also include ownership or interest in the cryptoasset (per Regulation 14A(3)(a) and (c) of the ML Regulations).
Certain cryptoassets may qualify as specified investments and fall under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, or they might be categorized as electronic money, thus subject to the Electronic Money Regulations 2011.
Cryptoasset businesses providing regulated investment or electronic money services must secure the necessary regulatory authorizations to ensure compliance with anti-money laundering and counter-terrorist financing regulations.
The FCA’s Strategy for Overseeing Cryptoasset Enterprises
The FCA applies a risk-based approach to oversee crypto businesses, tailoring requirements to risk levels:
- Businesses with higher money laundering and terrorist financing risks undergo thorough registration and ongoing supervision.
- Adequate policies, procedures, and controls are essential to manage risks effectively.
- Adapt your approach based on your business’s size and offerings.
- Appoint a nominated officer for compliance, responsible for reporting suspicious activity to the NCA.
Requirements for Adhering to Regulations in the Cryptoasset Industry
- Evaluating money laundering and terrorist financing risks linked to emerging technologies.
- Apply enhanced due diligence measures when dealing with customers considered high risk, such as politically exposed persons (PEPs).
- Implementing appropriate policies, systems, and controls to mitigate money laundering and terrorist financing risks.
- Continuously monitor all customer interactions and transactions.
- Depending on your firm’s size and business nature, designating a board member or senior manager as the compliance officer for money laundering regulations.
- As appropriate for your business’s size and type, establish an independent internal audit function.
- Screen your employees for compliance.
- Identifying and assessing risks associated with money laundering and terrorist financing.
- Perform customer due diligence when entering into a business relationship or transaction.
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