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New data from the UK Financial Conduct Authority (FCA) has shown that, despite the regulator’s best efforts, the success rate of attempted registrations from crypto-asset firms is still extremely low.
In the last 12 months (up to July 1), the FCA received 36 applications from crypto firms seeking to register under the anti-money laundering and counter-terrorist financing (AML/CTF) framework.
Of those applications, more than 90 percent were either withdrawn, rejected or refused, and only 9 percent were successful.
The figures make for disappointing reading for the FCA, which has taken steps to be more proactive in guiding and educating firms both before and during their applications.
Last monthPrevious 12 MonthsSince Jan 2020Applications received136319Applications determined Registered28 (9%)43 (14%)Rejected09 (10%)30 (10%)Withdrawn170 (78%)219 (72%)Refused03 (3%)11 (4%)Total390303
Source: FCA
Speaking to VIXIO, a spokesperson for the FCA said the regulator has seen little change in the quality of applications over the past year.
“Despite the guidance and engagement we provide to support firms, most of the applications we receive continue to be poor,” said the FCA.
“Those applying must be able to show us they meet the minimum standards that are in place to guard against the financial system being used to finance crime.”
The FCA added that the agency will continue to be “robust at the gateway” to ensure that firms meet the required standards for financial systems and controls.
It will also continue to reject applications from firms where there is insufficient information to conduct an assessment.
An ongoing problem
In January, as covered by VIXIO, the FCA expanded its resources to help businesses understand whether they need to register under the AML/CTF framework.
This included a flowchart that provides firms with a visualisation of Regulation 14A of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.
This is the key section of legislation that outlines crypto-related business activities that fall within the scope of money laundering regulations, requiring firms to register.
Back in January when VIXIO last covered this issue, the success rate of attempted applications was also extremely low.
At the time, it had been exactly three years since the FCA took on the registration regime, and only 41 applications out of more than 300 had been successful.
In the past six months, that number may have climbed to 43, but the bigger story remains the striking failure rate among the vast majority of applicants.
Sarah Pritchard, executive director of markets supervision, policy and competition at the FCA, said this is the “most significant” failure or withdrawal rate the FCA has ever seen when taking on a new remit.
“As part of the registration process we identified significant failures in relation to key controls such as customer due diligence, risk assessments, transaction and ongoing monitoring, governance and management information,” she said.
“In many cases, key personnel lacked appropriate knowledge, skills and experience to carry out allocated roles and control risks effectively, and were unable to evidence they met the standards for registration.”
