FCA laments the high number of financial crime ‘red flags’ missed by crypto firms

The Financial Conduct Authority said many crypto firms that have applied to register under money laundering regulations miss financial crime “red flags” and have inadequate controls.

A spokesperson for the FCA said to Morning Wire: “We have seen too many financial crime red flags missed by the cryptoasset businesses seeking registration.” Some firms do not have the necessary controls to raise red flags at all, the FCA said.

The FCA has so far registered 35 crypto firms out of more than a hundred applications it received since it required all crypto firms to register with it to comply with amended money laundering and terrorist financing regulations.

The FCA said it reviews cryptoasset firm applications to make sure that they meet minimum standards and “those who run these firms are fit and proper and that they have adequate systems to identify and prevent flows of money from crime”.

The spoksesperson reiterated the FCA’s warning and said crypto is “high-risk and unregulated, which means (people) are unlikely to have protection if things go wrong, so if they choose to invest in crypto they need to be prepared to lose all their money”.

Asim Arshad, a lawyer in the Crypto and Blockchain team at Macrell.Solicitors, said applicants find the FCA registration process time-consuming and costly. 

“Unfortunately, I do not think there is much more that crypto firms can do but be aware of the process and what it entails,” Arshad told Morning Wire “The issue appears to be more an organisational shortfall within the FCA itself.”

“Until the FCA can send out the message that applicants to the register are being dealt with swiftly and efficiently, we will continue to see crypto firms sidestep the UK as a potential jurisdiction to set up in,” he said.