AML and FinTech - back in the spotlight?

The suspicious activity reports (SARs) filed by banks with the US treasury department's Financial Crimes Enforcement Network (FinCen) which were leaked last month have highlighted the anti-money laundering (AML) failings by banks. The files suggest that these banks continued to transfer money, even when they knew it could be connected to fraud. The UK, in particular, was thrown into the spotlight as the files revealed that it was described as a "higher risk jurisdiction" in a US Treasury Report. This is due to the number of UK registered companies that appear in the SARs (over 3,000 - more than any other country named in the files). The files make it abundantly clear that UK financial services firms (including certain FinTech firms) need to examine their anti-money laundering programmes for compliance with UK rules.

The FCA became the AML and counter-terrorist financing (CTF) supervisor of UK cryptoasset businesses on 10 January 2020. From that date, it was necessary for existing cryptoasset businesses active in the UK to register with the FCA and comply with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. New cryptoasset businesses now must register with the FCA before commencing activity in the UK. If these businesses are not registered with the FCA by 10 January 2021, they will be forced to cease trading.

The FCA has confirmed that its supervisory approach is risk-based so that businesses who pose the greatest money laundering and terrorist financing threat to the UK will receive an increased level of supervision. The FCA has the power to commence an enforcement investigation if it has reason to believe serious misconduct has taken place. UK cryptoasset businesses must show the FCA they have policies, controls and procedures in place to proportionately manage their AML/CTF risks. They also need to carry out regular assessments of their policies, controls and procedures to ensure that these remain relevant and appropriate (this is especially important when these firms are launching new technologies). 

It is highly likely that the FCA will continue to focus on firms which they believe pose a money laundering threat to the public, and especially since the FinCEN leaks. This scandal serves as a reminder for cryptoasset firms to ensure that their anti-money laundering compliance processes are up to scratch and to register with the FCA in time to avoid scrutiny.