Alerts to UK financial institutions have recently been issued by the FCA over the financial crime risks associated with cryptoassets or crypto-currencies. Regulators in other jurisdictions are anticipated to apply a similar approach; hence the inclusion of specific requirements within the Fifth Anti Money Laundering Directive. EU regulators have also highlighted initial coin offerings (ICOs) and crypto-currencies as one of their priorities and the UK government has recently established a Crypto-assets Taskforce to explore the possibilities and risks arising from crypto-assets.

In response, financial institutions need to undertake a thorough risk assessment of their risk exposure. They may have to adjust their approach to financial crime risk management, even if they do not trade crypto-assets or crypto-currencies themselves.

Advocates of crypto-assets/currencies continue to praise them, while others are more measured in their commentary. Given the early adoption phase of crypto-assets/currencies in the economy, it is increasingly evident that they bring increased financial crime risks and financial institutions must act promptly to avoid regulatory censure or potential enforcement action.

Interested? Read our view on What Financial Institutions Need to Do

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