The United Kingdom (UK) Treasury released a new report that highlights the risks of cryptocurrencies as an asset.
The study titled ‘Anti-money laundering and counter-terrorist financing’ indicates that in 2022-23, cryptocurrency, banking and asset management created the highest risks associated with money laundering crimes. The report which was released on Wednesday took two years to be developed by the UK Treasury.
According to the report, over 375 new cases related to financial crimes like money laundering have been opened by another watchdog group in the UK outside the jurisdiction of the Financial Conduct Authority (FCA). FCA is the supervisory authority for financial services firms in the UK. Out of these 375 cases, 95 cases were related to crypto assets.
“Based on risk assessments of its sectors, the FCA’s view was that, in the reporting year 2022-23, retail banking (including payments), wholesale banking, wealth management and crypto-asset firms remained particularly vulnerable to financial crime and posed the greatest risk of being exploited for money laundering,” read an excerpt from the report.
The development comes in the wake of crypto mogul and former CEO of Binance, Changpeng Zhao being sentenced for 4 months in prison for failing to establish adequate anti-money laundering protections on Binance exchange platform.
FATF and crypto compliance
The compliance regulations play a key role within the crypto industry helping to avoid white-collar and other financial crime.
The main compliance regulator worldwide is known as the Financial Action Task Force or FATF, which can be defined as the global money laundering and terrorist financing watchdog. Its main objective is to elaborate clear guidelines and policies to help international lawmakers and crypto players worldwide.
One of the most important compliance rules set by the regulator entity is known as the FATF Recommendation 16, also known as the Travel Rule.
The Travel Rule establishes that Virtual Asset Provider or VASPs will need to collect certain information when the transaction between users reaches an amount of $1,000 or higher, the Virtual asset provider needs to collect the following information:
- The names of the originator (sender) and the beneficiary (recipient).
- The VA wallet address for each or a unique transaction reference number.
- Such information does not need to be verified unless there are suspicious circumstances related to ML/TF, in which case information pertaining to the customer should be verified.
