UK intends to regulate cryptocurrency exchange providers under EU’s AMLD 5: FATF

The Financial Action Task Force (FATF) has noted the efforts by the UK government to implement a regulatory framework for cryptocurrency exchange providers.

The FATF last week announced that it conducted an assessment of the UK’s AML/CFT system which involved a comprehensive review of the effectiveness of the country’s measures and their level of compliance with the FATF Recommendations.

In its evaluation report, while the FATF noted that virtual currency exchange providers are currently not covered by the AML/CFT requirements, it said that this is an “emerging risk” and added that there is no evidence yet to suggest that the ML/TF is occurring in the UK via this sector.

It recommended the UK government to “continue to develop an understanding of emerging risks (such as virtual currencies) and intelligence gaps, and take appropriate action.”

The agency also noted that the UK authorities have identified the emerging risks associated with cryptocurrencies and “are preparing regulations to extend AML/CFT requirements to this sector.”

“The UK acknowledges the inherent vulnerabilities associated with the anoymity of VCs [virtual currencies], and while the risk of ML/TF in this area is assessed as low, the UK acknowledges that there are intelligence gaps and VCs are being used in illicit activity (particularly in online marketplaces for the sale and purchase of illicit goods and services). As a result, the UK intends to regulate virtual currency exchange providers under its implementation of the EU’s fifth Anti-Money Laundering Directive.”

In October, the FATF said that it has adopted changes to the FATF Recommendations and Glossary that clarify how the Recommendations apply in the case of financial activities involving virtual assets. Reports have also suggested that the agency will publish its first rules for cryptocurrency regulation by June 2019.