If you intend to carry out cryptoasset activities in the UK, you will need to register with the FCA for anti-money laundering and counter terrorist financing purposes. This means that you need to show to the FCA that you are able to comply with the Money Laundering Regulations 2017.
Types of Cryptoasset Providers
There are two main types of cryptoasset providers which require FCA registration:
- Cryptoasset exchange providers - these are businesses which exchange or arrange the exchange of cryptoassets such as Bitcoin, Litecoin, Ethereum etc. This includes creators or issuers of any cryptocurrencies through an Initial Coin Offering or Initial Exchange Offering as well as operators of Cryptoasset Automated Teller Machines.
- Custodian wallet providers - these are firms which safeguards or administer cryptocurrency on behalf of customers or provide cryptographic keys on behalf of customers.
Key considerations
Your FCA application needs to pay particular attention to:
- Threshold conditions - To become authorised you have to show that you can meet the FCA's minimum standards – known as ‘threshold conditions’. This means having suitable senior management and appropriate resources to manage your business. It is important that your crypto business is organised effectively and you have access to appropriate expertise to manage your business such as in-house or outsourced IT AML/KYC software solutions providers.
- Demonstrating Compliance with the Money Laundering Regulations (MLRs) - You must show to the FCA that you will be able to comply with the MLRs. This means having policies, procedures and controls in place to prevent your business from being used for money laundering or terrorist financing. In particular you will need to verify the identity of your customers at the outset and monitor their ongoing activity.
- AML/CTF Policy - The AML Policy must show that you understand the key financial crime risks and have a framework in place to manage them. The policy should reflect JMSLG and FATF guidelines (e.g. red flags for crypto assets), FCA guidelines such as Financial Crime Guide (FCG), guidance on PEPs (FG17/6) and industry best practices.
- Information about beneficial owners/shareholders and managers - You will need to demonstrate the competence, honesty, integrity and reputation of the directors and owners of the business as well as the financial soundness of the shareholders. This means providing detailed information about managers and individuals (e.g., address, identity documents), and/or corporate shareholders (e.g., corporate structure) as well as copies of CV for the senior management.
How we can help you
- We understand the Money Laundering Regulations and how they apply to crypto currency businesses. We will be able to identify and focus on the specific regulatory risks relating to your business and prepare an application which addresses those risks.
- We have relevant policies and procedures to support your FCA application which will be included as part of the FCA application.
- We can also provide a fixed fee review service for an application which you may have prepared yourself. We can check your application before you submit it to the FCA.