In 2023, the Financial Conduct Authority (FCA), the UK’s financial regulatory body, has significantly ramped up its efforts to combat financial crime across multiple sectors, with a particular focus on retail and wholesale banking, wealth management, and crypto-asset firms. These sectors have been identified as highly susceptible to money laundering activities, prompting the FCA to adopt a more stringent regulatory stance.
Understanding the Risk Landscape
The FCA’s proactive approach includes conducting 231 in-depth analyses and seven on-site visits, revealing a complex risk landscape within these industries. Particularly concerning is the crypto sector, where out of 375 potential risk cases flagged by the FCA, 95 were directly related to crypto assets. This underscores the unique vulnerabilities associated with this emerging market, including its global reach, pseudonymity, and the rapid evolution of crypto products.
Survey and Regulatory Measures
In April 2022, the FCA expanded the REP CRIM survey to encompass crypto businesses. This crucial tool gathers detailed information about the anti-money laundering (AML) controls firms have in place. The data collected through REP CRIM, alongside other intelligence reports, enables the FCA to tailor its supervisory actions more effectively, ensuring that firms not only comply with existing regulations but also enhance their systems to preempt potential misuse.
Challenges with FCA Registration for Crypto Firms
Since January 2020, the FCA has overseen the AML framework for UK-based crypto businesses, including exchanges and custodians. The registration process introduced by the FCA is notably rigorous, designed to uncover any inadequacies in firms’ AML controls. This stringent evaluation has led to numerous applications being withdrawn, rejected, or refused, highlighting the difficulties crypto firms face in meeting the FCA’s high standards.
Consumer Protection and Market Fairness
The FCA’s March business plan reaffirms its commitment to consumer protection and the promotion of a fair crypto market. Efforts are underway to bolster the FCA’s capabilities to identify and address potential market abuses within the crypto sector. This is part of a broader strategy to maintain the competitiveness of the UK financial sector on a global scale.
Addressing Misleading Financial Advertisements
Further intensifying its scrutiny, the FCA has also focused on the realm of financial promotions. With the implementation of stricter advertising rules for high-risk investments in July 2023, there has been an uptick in the removal of misleading advertisements, especially those spread across online platforms. New guidelines issued in March target financial promotions on social media, including formats such as memes, reels, and gaming streams, to ensure that all information conveyed is fair and accurate, leaving no room for misleading content.
