A recent report from the U.K. Treasury Department has underscored the significant risk of money laundering posed by cryptocurrency firms, alongside retail banking, wholesale banking, and wealth management. The findings, based on risk assessments conducted by the Financial Conduct Authority (FCA) on 238 firms, shed light on the challenges faced by regulatory bodies in combating financial crime.

Crypto Firms Flagged for Money Laundering Risk

The report, released by the government’s financial arm, highlighted crypto firms as particularly vulnerable to exploitation for money laundering purposes between 2022 and 2023. The FCA, serving as the primary financial regulator in the U.K., has been diligent in ensuring that crypto entities register with the authority and adhere to anti-money laundering regulations since 2020.

Efforts to Combat Crypto-Related Crime

In response to the growing concern over crypto-related crime, the U.K. police have intensified their efforts to crack down on illicit activities involving digital assets. In October 2022, it was reported that crypto tactical advisors were strategically deployed across the country to facilitate the seizure of digital assets linked to criminal activities. This initiative resulted in the confiscation of hundreds of millions worth of crypto proceeds, as confirmed by the National Police Chiefs’ Council.

FCA Supervision and Enforcement

The report revealed that during the reporting period, the FCA dedicated the equivalent of 52.8 full-time financial crime specialist employees to anti-money laundering supervision. Among these specialists, 15.8 were specifically focused on overseeing crypto businesses, reflecting the growing recognition of the unique challenges posed by the crypto sector.

Additionally, the FCA’s wider supervisory teams outside the dedicated financial crime specialist units initiated 95 cases related to crypto-assets, signaling a proactive approach to monitoring and regulating cryptocurrency activities.