The FCA has issued a Dear CEO letter regarding good practice for how banks handle financial crime risks posed by cryptoassets - including reasonable and proportionate measures to lessen the risk of facilitating financial crimes enabled by cryptoassets. The letter, although relating largely to banks and customers, is informative of the FCA’s view of the assets as high-risk and speculative investments or as a means of funding technological innovation, and also represents the FCA beginning to move to regulate the space.  The Dear CEO letter recommends steps including:

• developing staff knowledge and expertise to identify risks;
• ensuring existing financial crime frameworks adequately reflect crypto-related activities in which the firm is involved;
• carrying out due diligence on key individuals and, for crypto-exchange clients, assessing the adequacy of the exchange client’s own due diligence arrangements; and
• for ICO tokens, firms should consider the issuances’ investor-base, organisers, the functionality of tokens and the jurisdiction.

The FCA notes that the firms should assess the risks posed by a customer whose wealth or funds derive from the sale of cryptoassets, or other cryptoasset-related activities, using the same criteria that would be applied to other sources of wealth or funds.

If members have any questions, or would like to be added to the AIMA Digital Assets and Blockchain Circulation Group, please contact Oliver Robinson.