Introduction

If you want to provide crypto-based services in the UK, you need to register with the FCA for the cryptoasset AML/CTF registration. This registration, officially known as the FCA AML/CTF Cryptoasset Registration regime, ensures that your business complies with anti-money laundering (AML) and counter-terrorist financing (CTF) regulations.

The FCA supervises crypto businesses based in the UK under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. To offer crypto services in the UK, you must register with the FCA as part of its AML/CTF Cryptoasset Registration process.

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At Buckingham Capital Consulting, we help crypto businesses navigate the challenges of the FCA's crypto licence, formally known as the AML/CTF Cryptoasset Registration. We work with crypto firms to understand and address their AML risks, ensuring a smooth registration process with the FCA.

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Understanding FCA AML Regulations

It's essential to understand the specific AML regulations set by the FCA for cryptocurrency activities. These rules aim to prevent money laundering, terrorist financing, and other illegal financial activities in the crypto industry. By understanding these regulations, your business can operate according to the FCA's expectations.

 

Determining Registration Requirements

First, determine if your business activities fall under FCA Cryptocurrency AML registration. This means checking if your activities are considered "cryptoasset activities" by the FCA and whether your business meets the registration threshold. Carefully evaluate your cryptocurrency operations to determine your registration needs.

 

Developing AML Policies

Creating strong AML policies tailored to your cryptocurrency business is crucial. These policies should include customer due diligence, risk assessment, enhanced due diligence for high-risk transactions, and ongoing monitoring of cryptoasset activities. Comprehensive policies demonstrate your commitment to preventing financial crimes and complying with AML regulations.

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Conducting Risk Assessment

A thorough risk assessment is a key part of the registration process. Evaluate the specific money laundering and terrorist financing risks linked to your cryptocurrency operations. By identifying and documenting these risks, you can develop effective strategies and controls to mitigate them.

 

Implementing Compliance Monitoring

Set up robust compliance monitoring systems to detect and track suspicious activities in your cryptocurrency business. These systems should be able to identify potential money laundering or terrorist financing activities. Also, establish procedures for reporting suspicious transactions to the National Crime Agency (NCA) as required by AML regulations.

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Training and Awareness

Regular training for your staff is vital to ensure they understand AML regulations, their responsibilities, and the unique risks of cryptocurrency transactions. By equipping your employees with the necessary knowledge and skills, you can foster a culture of compliance and empower them to recognize and report suspicious activities.

 

Independent Audit and Review

Consider hiring an independent auditor to periodically review your AML compliance program. This external review helps ensure that your AML policies, procedures, and monitoring systems are effective and align with regulatory expectations. An independent audit provides assurance that your compliance efforts are robust and meet industry best practices.

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Application Submission

Prepare and submit your FCA Cryptocurrency AML registration application with accurate and comprehensive information about your business, AML policies, risk assessment, and compliance systems. Provide all necessary details and ensure accuracy in your application to avoid delays or complications.

 

Ongoing Compliance and Reporting

Maintain ongoing compliance with FCA AML regulations once registered. This includes regular reporting to the FCA, such as suspicious activity reports, annual financial crime reports, and updates on any changes to your business operations. Stay updated with reporting requirements and fulfill your ongoing compliance obligations to maintain your registration.

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Are You Required to Register?

The FCA considers the application of money laundering regulations on a case-by-case basis, which may differ for different business models. Generally, the regulations apply if you have a physical presence in the UK through which the cryptoasset business is conducted. However, merely having UK customers does not mean your firm falls under the ML Regulations. For example, a cryptoasset exchange provider with an ATM in the UK will be within scope regardless of the operator's jurisdiction or office location.

 

Cryptoasset Business Compliance Requirements

1. Identifying money laundering and terrorist financing risks.

2. Assessing ML/TF risks related to new technologies.

3. Implementing appropriate policies, systems, and controls to mitigate ML/TF risks.

4. Appointing a board or senior management member as the nominated officer for AML compliance.

5. Establishing an independent internal audit function, depending on the size and nature of the business.

6. Conducting employee screening.

7. Performing customer due diligence during business relationships or transactions.

8. Applying enhanced due diligence for higher-risk customers, such as politically exposed persons (PEPs).

9. Conducting ongoing monitoring of all customers.

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Cryptoasset AML Registration Application Fee

The FCA application fee for the cryptoasset AML registration is £10,000.

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Information Required for FCA Cryptoasset AML Registration

The FCA will need key information about your business, including:

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• Programme of Operations: Outline the specific cryptoasset activities of your business.

• Business Plan: Detail business objectives, customers, employees, governance, plans, and projections. Include transaction volume and value, client types, pricing, and main income and expense lines.

• Marketing Plan: Describe customers and distribution channels.

• Structural Organisation: Explain how your business is structured and organised, including any outsourcing arrangements.

• Systems and Controls: Provide details of key IT systems, including IT security policies and procedures.

• Individuals, Beneficial Owners, and Close Links: Directors and other responsible persons must have good reputations and appropriate knowledge and experience. Appoint a person for MLRs compliance.

• Governance Arrangements and Internal Control Mechanisms: Provide details of governance arrangements and internal controls for identifying and assessing risks and AML/CTF control measures.

• AML/CTF Framework and Risk Assessment: Highlight risks specific to your business model and mitigation strategies. Include AML/CTF staff training material.

• Business-wide Risk Assessment: Include monitoring and mitigation policy.

• Cryptoasset Public Keys/Wallet Addresses: Provide all cryptoasset addresses used in business activities.

• Customer Onboarding Agreements and Processes.

• Customer Due Diligence and Enhanced Due Diligence Procedures.

• Transaction Monitoring Procedures.

• Record-keeping and Recording Procedures.

• Business Continuity Plan.

• Outsourcing Arrangements Policy and Service Licence Agreements.

• Budget Forecasts and Financials for the First Three Financial Years.

• Money Laundering Reporting Individual Forms for all directors, executives, and officers.

• Beneficial Owner Forms for shareholders.

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Conclusion

Registering for FCA cryptoasset AML compliance can be complex, but with thorough preparation and understanding of the requirements, you can navigate it successfully. Buckingham Capital Consulting is here to assist you at every step, ensuring your application is thorough and compliant with all regulatory standards.