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The government is aiming to improve the effectiveness of the country’s anti-money laundering (AML) regulations by closing loopholes, addressing proportionality concerns and tackling the threat of illicit activity in the crypto-asset sector.
HM Treasury’s request for comments on proposed reforms to anti-money laundering (AML) regulations comes after a consultation highlighted specific weaknesses in the UK’s regime.
These include issues with pooled client accounts, trust registration, crypto-asset business regulation and the practicalities of customer due diligence.
The proposed reforms will be introduced through a statutory instrument (SI), a form of secondary legislation, and include amendments to the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLRs).
They aim to close regulatory loopholes, address proportionality concerns and account for evolving risks in relation to money laundering and terrorist financing.
HM Treasury said: “This Statutory Instrument is one part of the government’s response to those concerns, aiming to deliver a more risk-based, proportionate regime that is robust against financial crime whilst remaining workable for industry.”
It has requested comments on the proposed reforms by September 30, 2025.
Taking the crypto threat seriously
Consistency across the crypto-asset sector is a key theme of the reforms, and the SI amends the registration and change-in-control thresholds for crypto-asset firms to align with thresholds in the Financial Services and Markets Act (FSMA).
It also aims to ensure that owners of crypto-asset firms with complex ownership structures are not excluded from fit-and-proper checks.
In addition, the SI amends the scope of fit-and-proper tests for crypto-asset businesses registered under the MLRs, applying them to both registration and change-in-control events.
These amendments show that the UK is taking the potential abuse of crypto-assets seriously and is committed to staying ahead of criminals by closing legislative gaps swiftly.
The reforms follow the 2025 National Risk Assessment (NRA), which highlighted the escalation in crypto risks.
Crypto-asset service providers remain high risk for money laundering and medium risk for terrorist financing, but the NRA noted that the risks are increasing rapidly.
Although 48 crypto firms are registered under the UK’s AML regime, enforcement challenges remain. The Financial Conduct Authority (FCA) has identified 32 firms operating without registration and has taken action against several.
The NRA noted that between $1.7bn and $5.1bn in illicit crypto transactions annually have a UK connection.
Criminals exploit unregulated exchanges, offshore platforms and privacy-enhancing technologies – such as mixers, chain-hopping and self-hosted wallets – to obscure the source and destination of funds.
In addition, terrorist groups are increasingly experimenting with crypto-based fundraising and transfers.
Prioritising the fight against digital asset crime
Tackling illicit activity in the crypto-asset sector is a shared priority for the UK’s National Crime Agency (NCA) and the FCA.
As covered by Vixio, the agencies released their nine priority economic crime areas in July, with the aim of building resilience against the criminal use of digital currencies.
Priorities include identifying illicit activity linked to fraud, ransomware and terrorist financing, freezing suspect funds on virtual asset platforms and boosting public awareness of crypto-related risks.
The initiative also seeks to strengthen engagement between law enforcement agencies and regulated crypto service providers, fostering greater cooperation in tackling digital asset crime.
