UK Financial Watchdog Cautions Banks Against Crypto Risks
The UK Financial Conduct Authority (FCA) has advised banks to be very cautious when dealing in cryptocurrencies.
In a letter issued to banks, the financial watchdog highlighted the potential of cryptoassets being used for illicit activities due to the anonymity it offers. The FCA urged the banks to enhance their scrutiny when dealing with clients engaged in crypto-related activities.
“You [Banks] should take reasonable and proportionate measures to lessen the risk of your firm facilitating financial crimes which are enabled by cryptoassets,” the letter read.
The FCA outlined a number of measures which banks should undertake to ensure transparency when they offer their services to current or prospective clients who derive significant business activities or revenues from crypto-related activities.
This includes developing staff knowledge and expertise on cryptoassets, ensuring that existing financial crime frameworks adequately reflect the crypto-related activities which the firm is involved in, carrying out due diligence, and engaging with clients to understand the nature of their businesses.
For customers or clients involved in holding or trading cryptoassets, the regulator said:
“Firms should assess the risks posed by a customer whose wealth or funds derive from the sale of cryptoassets, or other cryptoasset-related activities, using the same criteria that would be applied to other sources of wealth or funds.”
The letter follows the regulators’ effort to close in on the free-wheeling cryptocurrency industry. Last month, the FCA launched investigations into 24 cryptocurrency businesses. The regulators said that it was looking into the activities of the unauthorized firms to determine whether they might be carrying on regulated activities that require its authorization.
Most recently, the FCA issued an official statement on the requirement for firms offering cryptocurrency derivatives to be registered.
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