Researchers warn that red flags raised in a third of crypto institutions

According to the researchers, researchers who are calling for closer scrutiny of the fast-growing sector have found that money laundering red flags have been pointed out in more than a third of money institutions. Electronically licensed in the UK.

Transparency International UK has warned in a report that the payments industry could become a “primary gateway” for illicit funds from around the world unless the industry is shut down. more stringent enforcement.

Cryptocurrency institutions are licensed and regulated by the UK’s Financial Conduct Authority, and are allowed to issue payment cards and provide bank accounts and remittances. However, unlike traditional banks, they cannot provide loans or mortgages and uninsured by the Financial Services Compensation Program.

According to FCA data, companies processed over £500 billion in the 12 months to June 2021. The UK government estimates that in 2019, UK crypto companies held £10 billion. He is in the client fund.

During a review of 261 crypto institutions licensed to operate in the UK, Transparency International discovered 100 potentially red flags for money laundering, indicating more risk. is to demonstrate actual misconduct. Concerns include direct owners or directors named in money laundering investigations or senior employees or directors who have worked at alleged or proven organizations anti-money laundering error.

“While EMIs present exciting business opportunities for investors and customers, their growth has not been matched,” said Ben Cowdock, lead investigator at Transparency International. with their supervision”. “Without tighter controls on those who control and manage these companies, there is a real risk that the industry will become a new frontier for money launderers.”

During the 2019/20 financial year, nearly a third of “suspicious activity reports” – records submitted by banks or other regulated entities to law enforcement – ​​involved criminal funds. suspiciously coming from the field of electronic payments.

Transparency International’s assessment also shows that Russian and Ukrainian websites are offering to set up anonymous companies with accounts at UK crypto institutions, while crypto businesses UK-licensed electronics are for sale on LinkedIn and other websites for between £600,000 and £1.5 million.

The transparency advocacy group has called into question the adequacy of oversight of the sector, amid a flurry of license applications and HR issues at FCA.

Between 2015 and 2020, the FCA conducted five investigations into cryptocurrency providers, according to the FT’s November 2020 Freedom of Information request.

“We are focused on tackling financial crime,” said the FCA. We’ve done a significant amount of work to raise financial crime standards at payments and crypto companies, including placing business restrictions on some companies. . We will continue to act decisively when companies fail to meet the standards we expect. ”

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