Money laundering: cryptoassets, promotions and the proceeds of crime

25 September 2023

Last Thursday, we published an article highlighting some recent, more unusual, money laundering schemes. We encouraged organisations to consider their anti-money laundering (AML) arrangements in light of these. We also included a reminder that all companies are subject to the Proceeds of Crime Act 2002 (POCA) and that no organisation in the UK is immune from the risks of money laundering.

In a timely manner, the same day, the Financial Conduct Authority (FCA) published a “final warning” letter for cryptoasset firms marketing to UK consumers.

Specifically, the FCA stated that certain cryptoassets will soon be brought within the UK’s financial promotion regime. All firms marketing cryptoassets to UK consumers will be required to comply with this regime. If unregistered cryptoasset firms continue to promote cryptoassets to UK consumers, without having an authorised person approve the promotion, they may commit a criminal offence under the Financial Services and Markets Act 2000.

Notably, the FCA also addressed the “intermediaries” that play a “critical” role in enabling these cryptoasset firms to target UK consumers. These apparently include:

  • social media platforms;
  • search engines;
  • app stores; and
  • payments firms.

The FCA urged all these businesses to “carefully consider” their obligations under POCA. In particular, the FCA raised its concern that the benefits obtained by unregistered cryptoasset businesses, if they were based on unlawful financial promotions, might be the proceeds of crime. These “intermediaries” are therefore at risk of receiving and dealing with criminal property, and thereby committing POCA offences.

This is another example – like those addressed in our article – of how new industries, especially those online, can attract novel money laundering risk. It is perhaps not immediately obvious that social media platforms might commit money laundering offences.

This warning from the FCA also demonstrates how expanding regulation can bring new companies and industries within scope of AML legislation. We repeat our advice to organisations to be constantly vigilant for emerging and developing risks in this space, and to critically consider whether their AML arrangements really are appropriate and up to date.

We also remind all businesses supporting unregistered cryptoasset firms of their obligation under POCA to report suspicious activity. Failing to disclose suspicious activity is a criminal offence. Intermediaries that support unregistered cryptoasset firms to make illegal financial promotions should also consider their obligations under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to ensure that they remain compliant, if applicable.