The Financial Conduct Authority in the UK wrote a letter to an unknown number of CEOs in banking firms around the country addressing cryptocurrencies, their risks, and how they should view them with regard to their own customers.
“There are many non-criminal motives for using cryptoassets… However, this class of product can also be abused because it offers potential anonymity and the ability to move money between countries. You should take reasonable and proportionate measures to lessen the risk of your firm facilitating financial crimes which are enabled by cryptoassets,” the FCA wrote in its memo.
In particular, the FCA was concerned with clients that do large amounts of business with cryptocurrencies, suggesting that banks “enhance [their] scrutiny of these clients and their activities.”
The memo specifically points out cryptocurrency exchanges, wealthy holders, and ICOs. To minimize the risk of criminal activity, the organization advised banks to communicate with their clients and “[carry] out due diligence on key individuals in the client business including consideration of any adverse intelligence.”
The FCA also addressed the possibility of clients purchasing national cryptocurrencies that were created or the purpose of evading sanctions, such as the Petro.
“Where a firm identifies that a customer or client is using a state-sponsored cryptoasset which is designed to evade international financial sanctions, we would see this as a high-risk indicator,” the organization wrote.
Banks were also asked to take a closer look at customers who invest large amounts of money into ICOs, citing that they are more likely to be victims of investment fraud, something unfortunately prevalent in this particular market.
The FCA is often involved with the cryptocurrency market in the UK, providing guidance such as making investors aware of the potential pitfalls of hauling money into ICO projects and requiring cryptocurrency derivatives to be MiFID II-compliant.