FATF Report: UK’s Crypto Exchanges Pose ‘Low Risks’ Of Money Laundering and Terrorism Financing


U.K –based cryptocurrency exchanges reportedly pose a “low risk” as potential avenues for illegal activities like money laundering and terrorist financing.

The seemingly positive outlook crypto is part of a wider report on AML risks in the country, as assessed by global anti-money laundering body Financial Action Task Force (FATF), results of which the policymaker published last week.

According to the FATF report, illicit activities such as money laundering are an “emerging risk,” into the broader crypto industry.

The report notes that cryptocurrency exchange providers are at the moment not covered by AML or counter-terrorism financing requirements, something the UK authorities will have to work on going forward.

It adds:

“This is an emerging risk, and there is not yet evidence to suggest that broad scale ML/TF is occurring in the UK through this relatively small sector.”

However, the global watchdog says that at the moment, there is nothing much in the form of tangible evidence to imply that such illegality is happening via cryptocurrency exchanges.

The FATF report, therefore, suggests that U.K. needs to take the appropriate action concerning potential risks, an aspect that would be possible when authorities understand the emerging threats that can come from the use of virtual currencies, or when there are intelligence gaps.

According to the report, U.K. regulators have acknowledged the presence of “inherent vulnerabilities” within the crypto space, especially as it relates to the anonymity of digital currency transactions.

The U.K has plans to develop regulatory frameworks that will help regulatory agencies to have a standardized approach to the regulation of cryptocurrency exchanges.

The nation’s financial regulator is looking to implement EU’s fifth AML Directive, which puts forth a framework of monitoring exchange services as related to crypto and fiat exchanges. The directive will also help authorities monitor the activities of wallet providers.

The current information about the U.K comes at a time when the global AML and FT watchdog is preparing to release a set of guidelines that will be essential in the regulation of cryptocurrencies.

The guidelines should be all set by June 2019, and will seek to have a global framework for monitoring and regulating crypto exchanges, firms that offer initial coin offerings (ICOs) as well as cryptocurrency wallet providers.

FATF’s initiatives come days after a meeting of G20 nations ended with a call to have the international community have a single approach to crypto regulations as well as taxation.

As well as regulating tax measures on crypto assets, the G20 leaders also pledged to have the burgeoning industry monitored to tackle anti-money laundering and financing of terrorism.

A similar call suggesting stronger crypto regulatory oversight came from the U.S. Treasury’s Office of Terrorism and Financial Intelligence. An official with the agency asked the international community to focus on having stringent guidelines for the cryptocurrency industry.

The FATF report on U.K and its AML/FT preparedness also comes a few days after a study conducted by Catapult revealed that a majority of blockchain and crypto-related businesses in the country were concerned about lack of regulatory clarity.

Another 54 percent found it difficult to open bank accounts due to concerns from legacy financial institutions on AML and KYC regulations.

(Source: FATF)

Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.

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