John Glen, Member of the UK Parliament and Secretary for Economic Affairs of the UK Treasury Department, said that very few cryptocurrency firms comply with AML rules. Local cryptocurrency firms are trying to comply with new anti-money laundering (AML) regulations set by the UK Financial Conduct Authority (FCA), the official said. However, they have serious difficulties in registering.
As of May 24, FCA has registered only five cryptocurrency companies, Glen said. Ziglu, Archax, Digivault, and two companies of the Gemini crypto exchange.
“A significant number of companies have failed to implement robust AML systems. And hire the right staff”, Glen said in a written reply to MP Philip Davis.
Earlier this week, Davis posed a series of written questions to Chancellor Rishi Sunak about the ongoing delays in registering crypto companies with the FCA.
The registration process remained extremely slow. Due to the complexity and standard of the applications received, and the pandemic limiting the FCA’s ability to visit firms as planned.
The FCA has rejected over 90% of registration applications. In particular, the regulator rejected applications from 167 companies. Now another 77 companies are awaiting FCA decisions.
These companies are now in uncertainty as to whether they will be able to continue operating after July 9th. By this date, they must either be included in the FCA register or cease trading.
Cryptocurrency companies that haven’t yet applied for registration need to stop their operations in the UK. And withdraw their cryptocurrency assets. This is due to the fact that after the specified period, the company’s activities in the country will be considered illegal.
The regulator also said that additional reporting obligations may be introduced, which may be required in the future.
FCA may oblige cryptocurrencies to provide additional reporting on possible risks of money laundering
At the request of the regulator, financial institutions are required to submit annual reports on suspicious transactions since 2016. The FCA now intends to expand the requirements for Virtual Asset Service Providers (VASP). The agency has put forward a proposal that all cryptocurrency companies compile a report on the possible risks of financial crime, regardless of their annual revenue.
According to the FCA proposal, firms should provide information on the number of clients in “high-risk” jurisdictions; the number of users who were denied service due to involvement in financial crimes; and also rank the “three most common fraudulent methods”.
According to the proposed rules, cryptocurrency companies required to provide this data from January 10, 2022.
The department announced the need to collect more detailed information. Since working with crypto assets implies high risks of money laundering. The initiative aims to strictly adhere to the European Union’s Fifth Anti-Money Laundering Directive (AMLD5). FCA will accept comments on this proposal until 23 November, and plans to submit a directive with updated rules by the first quarter of 2021. Recall that a year ago, the agency finalized the guidelines for cryptoassets, giving definitions of stock tokens, as well as instrumental and exchange tokens. Last month, the UK Treasury asked the FCA to monitor cryptocurrency promotions that could mislead users.