12 Jun 2018
FCA UK issues crypto risk warning that is specifically addressing banks. The FCA has urged greater inspection of client and customer activities in case they are dealing with “cryptoassets.”
12 June, AtoZ Markets – The UK’s financial markets’ regulatory body, the Financial Conduct Authority (FCA), has called for banks’ CEOs to wary of cryptocurrency related risks.
The FCA has warned country’s banks about the potential risks they might face when dealing with cryptocurrencies. The watchdog has been issuing some of the similar formal warnings related to the digital currency markets even before. Yet, in its latest announcement, the UK regulator has addressed the banks specifically.
The FCA has urged greater inspection of client and customer activities in case they are dealing with “cryptoassets.” The letter from the regulator reads:
“Where you offer banking services to current or prospective clients who derive significant business activities or revenues from crypto-related activities, it may be necessary to enhance your scrutiny of these clients and their activities.”
The FCA further explains that it would be appropriate to carry out due diligence on key individuals in the client business. In order to reduce the risk of financial crime, it is necessary to ensure that “existing financial crime frameworks adequately reflect the crypto-related activities which the firm is involved in."
The UK watchdog has admitted that not all businesses and individuals that hold or trade cryptos would pose the same risk. In relation to this point, the FCA has noted a number of “high-risk” signals. These comprise a client using a state-sponsored cryptocurrency, "which is designed to evade international financial sanctions," and retail customer sending large sums to initial coin offerings (ICOs) among others.
The UK watchdog writes:
“Following a risk-based approach does not mean banks should approach all clients operating in these activities in the same way. Instead, we expect banks to recognise that the risk associated with different business relationships in a single broad category can vary, and to manage those risks appropriately.”
As per officials, not all motives for using cryptocurrencies are illegal. However, taking into consideration the "potential anonymity and the ability to move money between countries," the regulator urges financial firms to exercise caution when dealing with such cases.
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