FCA to oblige cryptoasset firms to submit fin crime reports
The UK Financial Conduct Authority (FCA) is extending the annual financial crime reporting obligation to cover more firms, including cryptoasset firms. The changes are outlined in a policy statement published by the regulator today.
In July 2016, the FCA introduced an annual financial crime reporting obligation for certain firms. In August 2020, the regulator consulted on increasing the number of firms that were required to submit the return (‘REP-CRIM’).
Today, the FCA said it is extending the scope of firms which are required to submit a REP-CRIM return from approximately 2,500 to approximately 7,000 firms. The watchdog based its assessment of which firms this extension will apply on its understanding of the potential money laundering risks.
In summary, the following additional firms will be required to provide the FCA with REP-CRIM information irrespective of their total annual revenue.
- Certain FSMA authorised firms falling within the scope of the MLRs which either:
– hold client money or assets (ie holding under FCA Handbook CASS 5, 6 or 7);
or
– carry on an activity that the FCA considers poses higher money laundering risk. (for eg dealings in investments as agents and managing investments).
- all payments institutions except for payment institutions that:
– only carry on at least one of the following payment services:
– Money remittance (these firms are supervised by HMRC for anti-money laundering (AML) purposes);
– Account information services and/or payment initiation services. These firms do not receive or hold clients’ money and do not carry out payment transactions, and so pose a lower AML risk;
-A person with temporary PI authorisation that immediately before IP completion day was providing payment services other than through a branch in the UK or a UK-based agent (as defined in the FCA handbook), as per revision to instrument.
- All electronic money institutions.
- All Multilateral Trading Facilities (MTFs).
- All Organised Trading Facilities (OTFs). OTFs are a type of firm introduced by MiFID II, and therefore the FCA is bringing them with the scope of the REP-CRIM obligations and updating its rules.
- All cryptoasset exchange providers and custodian wallet providers.
The FCA wishes to clarify that a cryptoasset business is not required to submit certain information (for instance, sanctions-specific information). However, a cryptoasset business may choose to do so voluntarily. Section 5 (Fraud) questions remain voluntary as it does for all firms submitting REP-CRIM.
The consultation proposed that cryptoasset firms would have to submit their first REP-CRIM from their next accounting reference date after 10 January 2022. The 10 January 2022 date was chosen because that was 12 months from the date by which cryptoasset firms carrying on business before 10 January 2020 had to be registered with the FCA.
However, on 16 December 2020 the FCA established a Temporary Registration Regime to allow existing cryptoasset firms, who had applied to be registered with the FCA, to continue trading. This was to enable those existing businesses to continue to trade after 9 January 2021 until 9 July 2021, pending the FCA’s determination of their application.
The FCA has, therefore, aligned the coming into force date of the new rules for all firms to 30 March 2022. This still allows cryptoasset firms at least 12 months from the date they had been registered by the FCA (ie by 10 January 2021). The new requirements do not affect the reporting timelines for firms that are already required to submit REP-CRIM on an annual basis.