The UK Financial Conduct Authority, responsible for financial regulations in the country, is looking to introduce further legislation that includes cryptocurrency firms.
Such companies operating on the island may need to submit annual reports on how they deal with financial threats and crimes.
In its latest consultation report, the watchdog noted that in July 2016, it introduced an annual financial crime report obligation for specific firms. By receiving such data, the FCA acquires information on “a range of indicators that reflect the potential money laundering risk of the firm, based on its regulated activities, and the nature of its customers.”
Out of 23,000 firms that the FCA supervises under The Money Laundering, Terrorist Financing, and Transfer of Funds Regulations (MLR), only 2,500 submit such reports called REP-CRIM. With the latest proposition, the regulator aims to extend the scope of reporting companies to “include firms that carry on regulated activities that we consider potentially pose higher money laundering risks.”
The broader range of firms proposed by the FCA will not separate them by total annual revenue. All firms authorized by the Financial Services and Markets Authority (FSMA) that hold client money or assets and that conduct activity “that we consider poses higher ML risk,” all payment providers, electronic money institutions, and multilateral and organized trading facilities will have to file such reports.
According to the FCA, all businesses supervised under the MLR fall into this category. This includes all cryptocurrency exchanges and custodian wallet providers. If implemented successfully, the new set of regulations will require data from 4,500 additional firms.
The FCA said that financial crime poses a significant threat to the UK’s security and economic prosperity. The criminal activity it facilitates “causes incalculable damage to our society, including our citizens, private sector businesses, and the public sector.”
Therefore, receiving information from the extended REP-CRIM reporting will “enhance our understanding of the financial crime threats,” which could ultimately prevent such activities.
The watchdog believes that these measures will provide “greater AML supervisory engagement with firms,” by efficiently utilizing its resources. The FCA allows comments and proposals to be sent by November 23rd, 2020, and it plans to publish a Policy Statement that will include any final rules by Q1 2021.
