A Guide to Anti-Money Laundering for Crypto Firms
On April 28 2022, the House of Commons Treasury Committee issued responses from the government, Financial Conduct Authority (FCA) and Payment Systems Regulator (PSR) to its report on fraud, scams and economic crime.
The original report, published in February 2022, called for a raft of measures, including the reform of Companies House and the suspicious activity report (SAR) program, improvements to the Office for Professional Body Anti-Money Laundering Supervision (OPBAS), and greater consistency in how crypto firms are registered.
Response from the government
Companies House reform
The government has signaled, in addition to the Economic Crime (Transparency and Enforcement) Act that was passed on March 15 2022, that measures to reform Companies House will be included in upcoming legislation planned for introduction in the Third Session, which starts on May 10.
The reforms include:
- An increase in the £12 fee it costs to set up a business – the committee had recommended that this be raised to £100);
- The power to challenge submitted information through a new querying power;
- to remove information if its validity cannot be proven.
The Department for Business, Energy and Industrial Strategy (BEIS) published a white paper setting out its final proposals on the reformation of Companies House that can be read here.
The government notes that its Economic Crime Levy will raise £100m per year for anti-money laundering (AML) measures, including a SAR reform program and supportive efforts to tackle illicit finance.
Combined with other funding, this means £400m will be spent tackling economic crime until 2025. This investment is designed to facilitate enhanced intelligence capabilities across the National Crime Agency (NCA) and the wider national security community to better identify and disrupt criminals and organized criminal gangs. New IT systems and plans for increasing staff and analytical capacity are listed as some of the core elements of the government’s SAR reform program.
Reviewing the scope of OPBAS
In February’s report, the Treasury recommended that OPBAS should be better resourced to enable it to carry out more checks and take “punitive action” against professional body supervisors. In its response, the government said that OPBAS’ remit and powers continue to be assessed “as part of the broader assessment of the structure of the UK’s supervision regime”. However, the government recommends that the review should not shy away from considering radical reforms in light of the reported poor performance encountered by OPBAS from a proportion of the professional bodies that it supervises.
In addition to the ongoing government consultation on a regulatory framework for stablecoins, the government will bring forward additional legislation to enable cryptoassets used for illicit purposes to be seized and recovered more quickly. “In particular, [we propose] the creation of a civil forfeiture power which would mitigate the risk posed by those that cannot be prosecuted but use their funds to further criminality,” the government said.
Response from the FCA
The FCA’s response to the Economic Crime report includes comments on the government’s Financial Promotions Regime and Data-Sharing Proposals.
The FCA clarified that there is no current obligation for online platforms and social media companies to perform Know Your Customer checks on firms advertising financial services on their sites. However, depending on how their advertising service operates, platforms should ensure that any promotions are either made or approved by an FCA/PRA authorized firm. Further, the promotions must be clear, fair and not misleading to give consumers the confidence to invest and “reduce the number of people who are investing in high-risk products that are not aligned to their needs”.
Additionally, the FCA noted the potential across financial services and financial regulation for the sharing and exploitation of data which would enable the disruption of serious and organized crime. The FCA details how data sharing can create a comprehensive, synthesized view that could impact multiple private partners – something that currently can only be provided after the analysis of bulk SARs.
The FCA includes in its response that it welcomes any initiatives from the government that could help build a system that would create these synthesized links in a real-time environment.
The responses from the government, FCA and PSR provide important indicators for compliance teams as to when and how the government will implement the Treasury Select Committee’s recommendations. The 2022-23 parliamentary session is likely to contain significant reforms to the UK’s financial crime infrastructure. Firms should monitor the latest announcements from the government and review any draft legislation, to understand any proposed reforms in more detail.
Originally published May 6, 2022, updated May 10, 2022
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