In a letter [PDF] addressed to domestic bank CEOs, the UK’s Financial Conduct Authority (FCA) specifically urged financial institutions to ramp up their scrutiny of clients who ‘derive significant business activities or revenues from crypto-related activities’. These clients include cryptocurrency exchanges, individual clients seen to be trading cryptocurrencies and companies that launch or participate in initial coin offerings (ICOs), a radical new form of fundraising powered by cryptocurrencies.
Classifying cryptocurrencies as ‘cryptoassets’, the FCA suggested they can be ‘abused’ due to their potential for anonymity that can enable financial crimes.
The FCA’s recommended measures include ‘carrying out due diligence on key individuals in the client business” and engaging with those clients to ‘understand the nature of their [crypto-related] businesses and the risks they pose”. Further, the watchdog also called on banks to ensure that ‘existing financial crime frameworks adequately reflect the crypto-related activities which the firm is involved in.’
The watchdog also called on banks to develop their own expertise on cryptocurrencies by educating staff in order to ‘identify the clients or activities which pose a high risk of financial crime’…