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FATF: UK Crypto Exchanges Pose ‘Low’ Money Laundering, Terrorist Financing Risk

Last Updated March 4, 2021 3:15 PM
Yashu Gola
Last Updated March 4, 2021 3:15 PM

The Financial Action Task Force (FATF) revealed that crypto exchanges operating in the United Kingdom pose low money laundering (ML) and terrorist financing (TF) risks.

The global standard setter for ML/TF published a report  to evaluate the overall efforts that the UK has put in combating the money-related illegal activities. As the study touched on various topics, including corporate transparency and economic sanctions, it also explored how the country was faring in a relatively new crypto space.

FATF observed that the UK authorities were aware of the risks associated with the growth of new payment technologies like bitcoin, and confirmed that they were taking proper measures to mitigate its use among launderers and terrorists. Excerpts:

“The UK acknowledges the inherent vulnerabilities associated with the anonymity of VCs, and while the risk of ML/TF in this area is assessed as low, the UK acknowledges that there are intelligence gaps and VCs are being used in illicit activity (particularly in online marketplaces for the sale and purchase of illicit goods and services). As a result, the UK intends to regulate virtual currency exchange providers under its implementation of the EU’s fifth Anti-Money Laundering Directive.”

The global watchdog awarded its highest rating to the UK for effectively managing the ML/TF standards, both inside and outside the crypto space. However, it also cautioned the country about how the financial institutions (FI) still need to work on their policies, controls, and procedures to minimize potential ML/TF risks in the booming crypto sector.

“However,” FATF asserted, “there is no requirement on FIs to assess the risks of new products and business products and delivery mechanisms, although this is covered in non-binding guidance.”

Global Crypto Regulations

The FATF report arrives ahead of the introduction of its global crypto regulatory framework, scheduled by June 2019. The initiative is likely to assist G20 nations to construct a uniform law for the crypto space, especially to govern crypto exchanges, initial coin offerings (ICO) and digital wallet services. It would also enable a frictionless coordination between financial regulators across the G20 nations.

“We will regulate crypto-assets for anti-money laundering and countering the financing of terrorism in line with FATF standards and we will consider other responses as needed,” the nations pledged.

Overall, the FATF report proves that cryptocurrencies are still not very popular among financial offenders and terrorists, mirroring what has been found by Europol this year. The European law enforcement agency had found that terrorists didn’t use bitcoin or any other crypto asset to fund any of their attacks in Europe.

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