From 10th January 2021, the Financial Conduct Authority (FCA) has mandated that any firm performing cryptoasset activities by way of business in the United Kingdom must be registered with the FCA. Firms that have failed to register are liable to civil and criminal proceedings by the FCA. Since the beginning of January 2020, the FCA acquired the role of supervising the Anti-Money Laundering and Counter Terrorist Financing supervisor of cryptoasset firms.
Regulation 14A of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 categorises cryptoasset activities as exchanging, or arranging to exchange, cryptoassets for money or other cryptoassets; operating machinery which exchanges money to cryptoassets or cryptoassets to money, akin to a cash-withdrawal machine; and, providing customer services to cryptoasset clients.
In order for a firm to register with the FCA, they must complete the online registration process which requires in depth detail on a variety of matters relating to the business itself, the individuals involved, and the practices which are in place. The FCA is seeking reassurance that cryptoasset firms have the necessary intercompany procedures in place to ensure effective and appropriate measures are taking when conducting cryptoasset activities. The FCA aims to decide a firm’s application within three months of receiving the necessary documentation. A registration fee of £2,000.00 is payable upon application for firms with cryptoasset gross income up to £250,000.00 or £10,000.00 for firms with over £250,000.00 cryptoasset gross income.
Useful guidance for a firm submitting their registration application to the FCA would be to ensure all the information provided is accurate and precise. It is empirical to provide complete answers on the application form and to have up-to-date supporting documentation. The required documentation includes the firm’s business and marketing plan; a description of the structural organisation of the firm; details of the IT systems in use including the security policies; governance arrangements and internal risk assessment procedures; the firm’s risk assessment; and a list of all cryptoasset addresses controlled and used within the firm. The FCA will use the information supplied to determine whether the applicant firm is ‘fit and proper’ to operate cryptoasset functions. The
Failure to register with the FCA prior to conducting cryptoasset activities for new businesses established after 9 January 2021, or existing firms failing to register by 10 January 2021, may be liable for up to two years imprisonment under Regulation 86 of the Money Laundering Regulations. However, if a firm took all reasonable steps were taken to mitigate the failure to register, a defence to the offence may be available. Furthermore, financial penalties may be enforced under civil proceedings in addition to the FCA withdrawing their authorisation of the firm.