UK Should Introduce Crypto Exchange Regulation, FATF Says
The Financial Action Task Force recommendation is part of a broader report about British anti-money laundering and combating the financing of terrorism systems.
The Financial Action Task Force (FATF) global standard-setting body, has called on the United Kingdom to implement cryptocurrency exchange regulation. The rules should tackle money laundering and terrorist financing issues as the existing British laws do not have enough safeguards, the body said on Friday.
The FATF warning is part of the organization’s mandatory analysis of its member states’ anti-money laundering (AML) and combating the financing of terrorism (CFT) systems. The UK report analyzed how the country’s legislative provisions and regulatory practices comply with FATF Recommendations. The analysis found that the UK follows the organization’s proposals on new technologies, among them crypto assets.
However, the authorities should consider introducing exchange oversight as virtual coin trading operators are outside of the country’s existing AML/CFT rules, FATF writes in the report. The relatively small British crypto market and the lack of major illegal activities are not reasons for the exclusion of trading operators from state supervision.
The organization issued seven recommendations to the UK, including:
“Progress plans to extend AML/CFT requirements and related supervision to virtual currency exchange providers.”
Currently, the UK is obliged to introduce some exchange supervision as part of its commitments to the European Union (EU). The fifth revision of the EU Anti-Money Laundering Directive (AMLD) implements mandatory due diligence procedures for crypto-to-fiat and vice versa markets. However, crypto-to-crypto operators are outside of the AMLD scope. At the moment, it is unclear how the planned UK exit from the bloc and the ongoing Brexit negotiations will affect EU rules implementation in the future.
The FATF UK recommendations follow the organization’s recent decision to offer crypto regulatory rules to its member states. In October, the organization amended its AML/CFT rules, called Recommendations, to include the term ‘virtual asset’ and ‘virtual asset service provider.’ By June next year, FATF is to publish guidance for international virtual coin regulations that should cover exchanges, wallet providers and initial coin offering-related firms. The countries that fail to meet the new provisions will be put in the to FATF blacklist, which restricts access to the global financial system.
The organization has 37 members, among them US, China, Russia, Australia, Japan, Hong Kong, Germany, France, Turkey, and Saudi Arabia.