The United Kingdom’s HM Treasury has recently unveiled a draft of proposed amendments to current money laundering regulations, aimed at closing loopholes and addressing evolving risks in the financial sector. One of the key changes includes imposing stricter requirements for cryptocurrency businesses operating in the UK.
The draft document states that the updates are intended to establish a more risk-based and proportionate regulatory framework that is effective in combating financial crime while remaining feasible for industry players. The government has also committed to enhancing sector-specific guidance on anti-money laundering (AML) and counter-terrorist financing (CTF) compliance, as well as publishing separate guidelines on the use of digital identity verification for AML/CTF purposes.
Following a public consultation conducted in 2024, which identified shortcomings in the UK’s regulatory framework related to areas such as pooled client accounts, trust registration, oversight of crypto businesses, and challenges in conducting customer due diligence, the proposed changes aim to address these vulnerabilities.
The National Risk Assessment of Money Laundering and Terrorist Financing report, released in July, highlighted the significant risks posed by financial crime in the UK due to its large and open economy. The Home Office’s Economic Crime Survey 2024 revealed that around 2% of UK businesses, equivalent to approximately 33,500 entities, reported instances of known or suspected money laundering in the previous year. The survey also indicated that fraud, particularly cyber-enabled fraud associated with foreign actors, now accounts for over 43% of all crimes in England and Wales.
In light of these findings, the role of crypto assets in illicit activities has become a growing concern. A survey conducted by the Financial Conduct Authority in 2024 showed that 12% of UK adults owned cryptoassets, with law enforcement agencies noting an increase in their use for money laundering schemes, often facilitated by service providers located outside the UK.
The proposed regulatory changes for crypto firms include the application of a more comprehensive “fit and proper” test for firm controllers by the Financial Conduct Authority, replacing the existing beneficial owner test to ensure that complex ownership structures are adequately scrutinized. Additionally, the threshold for change-in-control notifications will be lowered from 25% to 10%, aligning with the Financial Services and Markets Act (FSMA) regime. This means that any party acquiring a stake of 10% or more, or exerting significant influence, must notify the FCA.
Furthermore, the amendments cover various aspects such as customer due diligence procedures, trust registration requirements, restrictions on correspondent banking relationships, and technical updates like converting thresholds from euros to sterling. Stakeholders are encouraged to provide feedback on the draft regulations until September 30, with the aim of finalizing the amendments for Parliamentary consideration in early 2026.
This comprehensive overhaul of the UK’s money laundering regulations reflects the government’s commitment to enhancing the country’s defenses against financial crime and ensuring the integrity of its financial system.