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.
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