In brief
- The proposed legal changes aim to address vulnerabilities and modernize the rules in response to emerging threats.
- A significant shift sees the ownership threshold for crypto companies triggering regulatory scrutiny lowered to 10%.
- Stakeholder input is being sought until September 30, with the updated regulations slated for parliamentary review in early 2026.
This week, the UK Treasury unveiled a provisional draft outlining modifications to the current anti-money laundering (AML) framework. The aim is to close existing gaps and mitigate contemporary risks, with a particular focus on bolstering regulations for businesses operating within the cryptocurrency sector.
The draft document states that the intended improvements will result in “a more risk-sensitive, well-balanced system that is both resistant to financial crime and practical for those working in the industry.”
Furthermore, the government has declared its commitment to providing enhanced sectoral guidance on adhering to AML/CTF standards across multiple domains. They also intend to release separate directives regarding the adoption of digital identification verification for AML/CTF compliance procedures.
AML and CTF are standard abbreviations used within the financial industry, referring to anti-money laundering and counter-terrorist financing measures, respectively.
This announcement follows a public consultation conducted in 2024, which underscored vulnerabilities within the UK framework relating to shared client accounts, trust registration protocols, oversight of crypto businesses, and complications concerning customer due diligence processes.
According to the National Risk Assessment of Money Laundering and Terrorist Financing report released in July, these risks are considerable. The report highlights the UK’s persistent vulnerability due to its expansive and accessible economic environment.
Concurrently, the Home Office’s Economic Crime Survey 2024 estimated that approximately 2% of UK enterprises – around 33,500 businesses – encountered confirmed or suspected instances of money laundering during the preceding year. The survey revealed that fraud, particularly cyber-enabled fraud connected to international entities, now constitutes over 43% of all criminal activity in England and Wales.
Within this context, digital assets are increasingly perceived as a source of concern. A 2024 survey conducted by the Financial Conduct Authority (FCA) indicated that 12% of UK adults possessed cryptocurrencies. Law enforcement agencies have observed their rising prominence in money laundering operations, often facilitated by service providers located outside the United Kingdom.
The proposed regulations outline several adjustments impacting cryptocurrency businesses. The Financial Conduct Authority intends to implement a more comprehensive assessment of the suitability of firm controllers, replacing the current “beneficial owner” evaluation. This aims to ensure effective oversight of intricate ownership structures.
Further stipulations include a reduction in the threshold requiring notification of changes in control, from 25% to 10%. This aligns the regulations with the Financial Services and Markets Act (FSMA) framework.
Essentially, any party acquiring a stake of 10% or more – or exerting substantial influence – will be mandated to inform the FCA.
The modifications also encompass enhanced customer due diligence requirements, trust registration protocols, restrictions on correspondent banking relationships, and necessary technical updates, such as the conversion of monetary thresholds from euros to British pounds.
The Treasury is soliciting comments and suggestions regarding the draft until September 30th. Following this period, the regulations will be finalized and presented to Parliament for consideration in early 2026.
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