The FCA often seem like faceless people making decisions on your future livelihood.
Sometimes their lack of, or even deluge of detail regarding their decision can make you frustrated or angry. This can cause upset and friction within the new business, either start-up or diversification. Business partners fly off the handle at the drop of hat.
Guidance and direction is freely available from the FCA but sometimes it seems they are talking a different language.
We can help you rectify the issues.
Often your application may lack the depth of content or description that the regulator looks for. They have a difficult job insomuch as they are there to protect the public from scams, charlatans, badly run businesses and any criminal activity that is inherent or who could take over your firm’s operations.
That’s where we can help. We have over 20 years regulatory experience and all of our consultants are qualified and experienced in their field. We don’t talk around the houses, we tell it to you straight. We will tell you what needs to be done, then help you do it, in partnership with us.
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Whether your application is for AML Registration (Crypto etc) or an application to get authorised under any of the other financial services legislation (FSMA Part IV, PSD2 etc), we have the experience, the knowledge, the qualifications, andWE CARE!
Complete the form below – Call us on +44 (0) 207 907 1434
The FCA, under the 5th Anti-Money Laundering Directive have required firms to register with them for Anti-Money Laundering.
Many cryptoasset firms have had their applications rejected or recommended to withdraw due to a poor standard of completion. FCA Cryptoasset firm AML registration has been extended for existing applicants.
FCA cryptocurrency registration is akin to an authorisation and requires a lot of information, packaged in the right way. Additional forms need completing to accompany your application. If you use the wrong words, the FCA can see red flags and this will go against you.
We can help you, like all the other firms we help, to get your business on the right track and as long as your business model is sound – we can provide the right package for your next submission.
If you want to reapply with a greater potential of success, working with specialists who will work with you throughout the process, help answer any questions and advise you on the correct responses, call the specialists in this area – Compliance Consultant, based in London and operates globally in regulatory matters including compliance and risk.
The FCA, under the 5th Anti-Money Laundering Directive have required firms to register with them for Anti-Money Laundering. Many firms have had their applications rejected or recommended to withdraw due to a poor standard of completion. We can help you, like all the other firms we help, to get your business on the right track and as long as your business model is sound – we can provide the right package for your next submission.
In Summer 2019, the FCA Issued A Dear CEO Letter To All Payment Companies Regarding Their Safeguarding Accounts and Their Management of Them.
Nearly 18 months on, have you changed your safeguarding methods?
As A Reminder, The Key Findings Were;
1. How well firms understood which funds are ‘relevant funds’
The FCA‘s review found that some firms were completely unable to explain which payment services they were providing and some were unable to identify when they were issuing e-money, whilst some others were unclear as to whether they were acting as agent or distributor for another PSP. This meant they could not accurately identify relevant funds, and as such, they did not know if or whether they were safeguarding the correct amount of relevant funds.
2. Effectiveness of firms’ safeguarding procedures and documentation
The FCA expects firms to maintain sufficient records to demonstrate compliance with their safeguarding obligations, and to have a documented rationale for every decision they make about their safeguarding process and the systems and controls they have in place.
The FCA found some firms relied on operational process documents which simply outlined the rules. The FCA considers that this does not sufficiently demonstrate a firm’s compliance with safeguarding obligations or record keeping requirements.
3. How well firms met the FCA‘s expectations on segregating funds
The obligation on firms to safeguard starts as soon as they receive relevant funds. The FCA expects firms to segregate relevant funds by receiving them into a separate account. Where, for customer convenience, any other funds are paid into the account, they should be removed as frequently as practicable throughout the day. In no circumstances should such funds be kept together overnight.
The FCA found that not all firms complied with these requirements, and in particular, some did not attempt to segregate relevant funds on receipt.
4. How effectively agents and distributors were overseen
Firms should have arrangements in place to ensure that relevant funds held by agents or distributors are safeguarded as soon as they are received.
The FCA found that some firms did not take any measures to ensure that they were segregated on receipt. Other firms calculated their safeguarding obligation at the end of the business day on which e-money was issued and transferred funds into a safeguarding account the next business day. This meant that relevant funds were combined with other non-relevant funds overnight.
5. Designating safeguarding accounts
Accounts in which relevant funds or assets are placed must be designated in a way that shows it is a safeguarding account. If this is not possible, the FCA expects e-money and payment institutions to provide evidence (such as a letter) confirming the appropriate designation.
The FCA found the account designations were not clear for several firms. Instead, the accounts were named according to their operational function or after the relevant agent or distributor.
6. How effectively firms carried out reconciliations
Firms must carry out internal and external reconciliations as often as necessary, considering the risks to which the business is exposed, and should have a clear explanation for their approach to reconciliations (which must be signed off by their board of directors).
The FCA highlights that in no circumstances would it be acceptable for a firm to carry reconciliation less than once during each business day.
The reconciliation should result in the amount of funds or assets safeguarded being:
sufficient to cover the amount that the institution would need to safeguard before the next reconciliation; and
not excessive – to minimise risks from commingling.
The FCA found that several firms did not carry out internal and external reconciliations, or did so infrequently, or did not adjust the balance of their safeguarded accounts in a timely way when they identified discrepancies. This resulted in the commingling of funds overnight.
7. The effectiveness of firms’ governance and oversight arrangements
Firms must have in place effective risk management procedures, adequate internal control mechanisms and maintain relevant records. Firms should monitor these procedures through robust governance arrangements. In addition, organisational arrangements must be sufficient to minimise the risk of the loss or diminution of relevant funds or assets through fraud, misuse, negligence or poor administration.
The FCA found some firms considered safeguarding risk only on an exceptions basis and would only revisit their processes if they identified a breach. In some cases, the FCA found controls to identify a safeguarding breach were not fit for purpose. This meant these firms did not adequately consider safeguarding when developing new products, leading to inadequate safeguarding processes.
Dear CEO Letter and FCA attestation
The FCA published a Dear CEO Letter on 4th July 2019 requiring all electronic money institutions and authorised payment institutions to review their safeguarding arrangements, to make sure they fully meet the requirements in the EMRs and PSRs (as applicable).
The FCA has asked firms to:
attest to the FCA that they are satisfied that they meet the requirements in regulation 23 of the PSRs or regulation 20 of the EMRs by 31st July 2019. Firms that are un-able to attest by this date should contact the FCA to discuss next steps; or
notify the FCA immediately if they are non-compliant in any material respect and take prompt remedial action.
The FCA will be conducting further work on firms’ safeguarding arrangements, and expects to see that firms have acted to review, and where necessary, remediate their processes. The FCA has said it will take appropriate action against firms with inadequate safeguarding arrangements.
If you have any concerns about your procedures or want them independently checked, call us today on 0207 097 1434
June 30th 202015th December 2020 was the final day to have your registration with the FCA recorded so as to receive priority review and be able to trade after 10th Jan 2021 9th July 2021.
YOU STILL NEED TO REGISTER TO CONTINUE TO TRADE AFTER THIS DATE!
Applications after this may be rejected or you will have to cease trading until the registration is confirmed.
Updated 18th Dec 2020
We have it on good authority (the FCA) that the reason for many applications not having been approved is the poor quality of the application and missing information.
Get you application reviewed by us NOW!
We will evaluate what is missing or what may need to be made more robust so when the FCA review your application and raise questions, you will have most of the answers to hand. Don’t delay as 9th July is only 6.5 months away
CALL US NOW! 0207 097 1434
We Can Help You With Your Application – Contact Us Now!
URGENT: Crypto – The FCA Deadlines for Anti-Money Laundering (AML) Registration
URGENT: Crypto – The FCADeadlines for Anti-Money Laundering (AML) Registration
There is Much Confusion Regarding The Need For AML Registration Among Firms In The UK.
If you are conducting any exchange of cryptoasset for money or any other medium of exchange, as a business in the UK, then you need to be registered for AML with the FCA.
What Do They Mean By Cryptoasset?
“cryptoasset” means a cryptographically secured digital representation of value or contractual rights that uses a form of distributed ledger technology and can be transferred, stored or traded electronically;
How Is Money Defined?
money in sterling, or money in any other currency, or
money in any other medium of exchange, but does not include a cryptoasset; and
it can also mean that “cryptoasset” includes a right to, or interest in, the cryptoasset concerns
So What Do I Have To Be Doing In My Business To Be Caught By The Regulations?
There is a range of definitions in the legislation that confirms the regulated activity, but if you are a Cryptoasset exchange providers and custodian wallet providers the you are likely to be caught.
In the Money Laundering Regulations, a cryptoasset exchange provider means a UK business that by way of business provides one or more of the following services, whether and including if they do so as creator or issuer of any of the cryptoassets involved, when providing such services.
These services are
(a) exchanging, or arranging or making arrangements with a view to the exchange of, cryptoassets for money or money for cryptoassets,
(b) exchanging, or arranging or making arrangements with a view to the exchange of, one cryptoasset for another, or
(c) operating a machine which utilises automated processes to exchange cryptoassets for money or money for cryptoassets.
Again, in the Money Laundering Regulations a Custodian Wallet Provider means a UK business who by way of business provides services to safeguard, or to safeguard and administer cryptoassets on behalf of its customers, or private cryptographic keys on behalf of its customers in order to hold, store and transfer cryptoassets, when providing such services.
So, if you have a UK registered office and carry on a day to day management of these activities, or operate an ATM facility in the UK (irrespectice of the geographic location of the cryptoasset activity is conducted) or have any UK presence that is engaged in or facilitates cryptoasset activity, you will likely need to be registered by the FCA to operate from 10th Jan 2021.
However, the FCA have warnedthat to do this, you need to register before the 30th June 2020 for applications from existing businesses (operating before 10 January 2020) to be received for priority review to check that they are ready to be determined. For existing firms, if they do not submit a complete application by 30 June 2020, the registration may not be processed by 10 January 2021 and if they are not registered with the FCA, on 10 January 2021 they will have to cease trading.
New businesses will need to be registered before 10th Jan 2021 or they will have to cease trading on that day until they are.
We can help you and have facilities open over the next 10 days to assist your firms in their registration. There are several things you need to have in place and we will help you in this area. Call early to avoid disappointment as our pipelines are getting busy.
The key thing to note is that any token that is not a security token, or an e-money token is an unregulated token.
What are unregulated tokens?
Unregulated tokens are those tokens that do not provide rights or obligations akin to specified investments (like shares, debt securities and e-money).
These tokens can be centrally issued, decentralised, primarily used as a means of exchange, or grant access to a current or prospective product or service. They might be used in one or many networks or ecosystems.
They can be ‘privacy tokens’, ‘fungible utility tokens’, ‘non-fungible tokens’, ‘access tokens’ etc. They can be fully transferable or have restricted transferability.
Below we provide further details based on the two broad categories of unregulated tokens identified in the UK Cryptoasset Taskforce report, and a further category specific to the FCA’s Guidance; exchange tokens, utility tokens, and tokens referred to as ‘stablecoins’.
Each of these categories can be further subdivided based on characteristics, such as transferability, fungibility, function, degree of centralisation etc.
So what are Exchange tokens?
Exchange tokens are used in a way similar to traditional fiat currency.
However, while exchange tokens can be used as a means of exchange, they are not currently recognised as legal tender in the UK, and they are not considered to be a currency or money.
They are generally more volatile than any currencies and commodities in general use, and as such they are not widely accepted as a means of exchange in the UK outside crypto and digital communities, and they are not typically used as a unit of account or a store of value.
These factors mean that very few merchants accept exchange tokens as a payment tool; numbers are limited to fewer than 600 in the UK.
Exchange tokens typically do not grant the holder any of the rights associated with specified investments. This is because they tend to be decentralised, with no central issuer obliged to honour those contractual rights — if any existed.
The FCA are aware that exchange tokens can be acquired and held for the purpose of speculation rather than exchange, as token-holders may anticipate that the value of these tokens will increase in the future on cryptoasset markets.
However, we do not view this as being sufficient for exchange tokens to constitute specified investments. The analogy would be an individual holding different fiat currency or a commodity, both of which are unregulated, in the hope of a gain.
Does the FCA regulate exchange tokens?
Exchange tokens currently fall outside the regulatory perimeter.
This means that the transferring, buying and selling of these tokens, including the commercial operation of cryptoasset exchanges for exchange tokens, are activities not currently regulated by the FCA.
For example, if you are an exchange, and all you do is facilitate transactions of Bitcoins, Ether, Litecoin or other exchange tokens between participants, you are not carrying on a regulated activity.
This is in line with our approach to other assets that remain outside our regulatory perimeter, but could nonetheless be purchased speculatively by some consumers with a view to realising profits if their value increases (eg fine wine or art).
However, firms should note that 5AMLD has been transposed into UK law on 10 January 2020 to introduce AML requirements to certain cryptoasset activities.
The Government has announced that in the UK they will go beyond the scope of 5AMLD which proposes to extend AML/CTF regulation to entities carrying out the following activities:
exchange services between one cryptoasset and another, or services
allowing value transactions within one cryptoasset exchange or
peer-to-peer exchange service provider
cryptoasset Automated Teller Machines
transfer of cryptoassets (In this context of cryptoassets,
transfer means to conduct a transaction on behalf of another natural or
legal person that moves a cryptoasset from one cryptoasset address or account to another)
issuance of new cryptoassets, for example through ICOs
the publication of open-source software (which includes, but is not limited to,
non-custodian wallet software and other types of cryptoasset related software)
It should be noted that this refers to an AML regime, and does not have the effect of bringing any participant into the full FSMA regulatory perimeter.
The Financial Action Task Force (FATF) has published guidance for cryptoasset firms that may assist firms, and the FCA has a Financial Crime Guide in their Handbook.
Utility tokens provide consumers with access to a current or prospective service or product and often grant rights similar to pre-payment vouchers.
In some instances, they might have similarities with, or be the same as, rewards-based crowdfunding. Here, participants contribute funds to a project in exchange, usually, for some reward, for example access to products or services at a discount.
Much like exchange tokens, utility tokens can usually be traded on the secondary markets and be used for speculative investment purposes.
This does not in itself mean these tokens constitute specified investments if they do not have the characteristics of relevant specified investments.
Does the FCA regulate utility tokens?
As utility tokens do not exhibit features that would make them the same as security tokens, they won’t be captured in the regulatory regime.
Attempts to stabilise token volatility
Attempts might be made to stabilise the volatility of cryptoassets, where the resulting token is commonly referred to as a ‘stablecoin’.
These ‘stablecoins’ are a type of token, and depending on what they are backed with, how they are arranged and how they are structured, will fall in different categories of our taxonomy. For instance, a ‘stablecoin’ could be considered a unit in a collective investment scheme, a debt security, e-money or another type of specified investment.
It might also fall outside of the FCA’s remit. Ultimately, this can only be determined on a case-by-case basis.
The most popular observed methods of stabilisation are Fiat-backed: these tokens are backed with fiat currencies, most commonly the United States Dollar (USD), but we have seen tokens backed with other fiat currencies, including the British Pound (GBP) or a basket of currencies.
In some cases, this involves the issuer “pegging” the value to that currency— i.e guaranteeing the value of the token, while holding a reserve offiat currency(ies) to ensure it can meet any claims. In other cases, the token gives the token holder an interest or right to the custodied fiat currency(ies), with the value of the tokens being directly linked to the value of the fiat currency held.
These distinctions are also relevant for the models described below.
Crypto-collateralised: these tokens are backed with a basket of cryptoassets with the aim of spreading risk and reducing price volatility.
Asset-backed: these tokens are backed with a tangible or intangible asset that usually has some economic value.
Algorithmically stabilised: these tokens attempt stabilisation through algorithms that may, for example, control the supply of the tokens to influence price.
Where attempts have been made to stabilise the volatility of cryptoassets these tokens will be regulated where they provide rights or obligations akin to specified investments as security tokens and e-money tokens do.
If they do not, they will be unregulated tokens, but some of the activities performed may still be subject to regulation, for instance AML requirements.
Tokens might be backed by financial assets, physical assets, or other cryptoassets. These tokens may in certain circumstances be security tokens or e-money tokens, depending on among other things, the rights granted by such tokens, the nature of the underlying assets and other relevant arrangements. For example, while gold itself is not a specified investment, a token that gives token holders a right or interest to gold held by a token issuer, or rights to payments from profit or income generated from the holding, buying or selling of gold may in certain circumstances be a specified.
Remember – If Your Firm Needs Authorisation With The FCA – Call us on 0207 097 1434
The MLR2017s (UK Money Laundering Regulations 2017) apply to businesses in a range of sectors at risk of facilitating money laundering or terrorist financing, including approximately 19,500 firms including banks, building societies and credit unions supervised by the FCA.
From 10 January 2020, businesses carrying on certain cryptoasset activities will be in scope of these regulations. It was announced in July 2019 that the FCA will be the AML/CTF supervisor for businesses carrying on cryptoasset activities in scope of the MLRs.
exchanging fiat currency (government-issued currency) for a cryptoasset or vice versa
exchanging one cryptoasset for another cryptoasset.
Cryptoasset Automated Teller Machine (ATM)
Physical kiosks that allow users to exchange cryptoassets and fiat currencies
Custodian Wallet Providers
A business that looks after the customer’s tokens in its IT system or server and may administer or transfer the token on behalf of the customer.
Peer to Peer Providers
A business that provides an online marketplace which facilitates the exchange of fiat currencies and cryptoassets (both fiat-to-crypto and crypto-to-crypto) between prospective buyers and sellers
Issuers of new cryptoassets, eg Initial Coin Offering (ICO) or Initial Exchange Offering (IEO)
A business that sells a cryptoasset, promoted or sold as a new type of cryptoasset or one that will become usable in the future, in exchange for fiat currency.
Publication of open-source software eg Non-Custodian Wallet providers
A business that provides software such as an application, that may be downloaded and used by a customer on their device to store or administer a token, e.g. a non-custodian wallet application that a customer can download onto a device to store the private key in relation to a token.
We understand, subject to confirmation from Treasury, that the publication of open-source software is unlikely to feature in the Government’s envisaged approach, recognising that AML/CTF regulation should be carried out on an activities-basis only.
All UK cryptoasset businesses carrying on activities in scope of the MLRs will need to register with the Financial Conduct Authority (FCA) from 10 January 2020. Cryptoasset businesses should ensure that they do not mislead customers as to what protections apply and the status of their FCA registration.
The FCA’s responsibility under this regime will be limited to AML/CTF registration supervision and enforcement only. Registration under the MLRs does not mean that customers will benefit from the protections of the Financial Ombudsman Service or the Financial Services Compensation Scheme (FSCS). As most cryptoassets are not specified investments under the Financial Services and Markets Act 2000 (FSMA), it is unlikely that customers will have access to Financial Ombudsman Service or FSCS.
Customers and firms may wish to consider the FCA guidance, where they have set out their position on the types of cryptoassets which will fall within the FCA’s regulatory remit and the implications this has on consumer protection.
Cryptoasset activity which falls in the unregulated space, as defined in the Guidance on Cryptoassets, will not have the same consumer protections
For any customers that consider Financial Ombudsman Service and FSCS protection important, we recommend that you check with the firm as to whether this protection applies to the cryptoasset transaction.
There are different dates to be aware of when registering your business with us:
New cryptoasset businesses that intend to carry on a cryptoasset activity after 10 January 2020, must be registered before they can carry on the activity.
Existing cryptoasset businesses which were already carrying out cryptoasset activity before 10 January 2020 may continue their business, in compliance with the MLRs, but must register by 10 January 2021 or stop all cryptoasset activity. We encourage businesses to apply well in advance of this deadline.
The FCA will consider applications for registration carefully to see whether they meet the conditions for registration that will be set out in the MLRs. Applications will be refused if the conditions are not met.
The FCA understand, subject to confirmation from Treasury, that the publication of open-source software is unlikely to feature in the Government’s envisaged approach, recognising that AML/CTF regulation should be carried out on an activities-basis only.
Step 1: 10 January 2020
FCA Gateway opens for businesses to submit applications for entry to the register. A business must comply with the MLRs in relation to cryptoasset activities. FCA have powers to supervise and enforce under the MLRs.
Step 2: 30 June 2020
Latest date for applications to be received for priority review to check that they are complete and ready to be determined.
Step 3: 10 October 2020
Latest date for complete applications ready to be determined by 10 January 2021.
Step 4: 10 January 2021
Any firm not registered must cease trading.
All businesses will need to comply with the MLRs from 10 January 2020. The FCA will start supervising businesses from 10 January 2020, irrespective of whether they have registered or applied to be registered.
the FCA’s supervisory approach to cryptoasset businesses will be in line with our approach to other businesses under the MLRs.
Firms who pose the greatest money laundering and terrorist financing risk will receive an increased level of supervisory focus. If, following supervisory engagement, we have reason to believe serious misconduct has taken place, we may decide to commence an enforcement investigation.
What If You Get It Wrong?
Enforcement is one of several regulatory tools available to the FCA. Their enforcement staff work closely with our authorisation and supervision functions, as well as with other regulators and law enforcement agencies to detect misconduct, including money laundering and terrorist financing.
The FCA already have enforcement powers under the existing MLRs and the Enforcement Guide sets out their general approach to using these powers. They expect the amended MLRs will extend our existing powers to cryptoasset firms and that the FCA will apply the same approach to cryptoasset firms under the amended MLRs as they do under the existing MLRs.
Our Enforcement Guide sets out the approach to enforcement and how the FCA use our powers of investigation, gather information and conduct an investigation. It also sets the FCA’s approach to imposing financial penalties and other disciplinary sanctions, explaining how they will use their powers under the money laundering regulations.
Approach to Enforcement explains how the FCA address harm and add public value through their statutory powers to investigate, take relevant civil, criminal and / or disciplinary action.
Enforcement Information Guide – this short guide includes a flowchart showing the process of a typical FCA enforcement case. It sets out the options to contest or resolve a case, the opportunities to make representations, and who the decision-makers are.
If You Need Help with your AML/CTF Policy or procedures, contact us on;
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We manage your regulatory application to the UK’s Financial Conduct Authority (FCA) by setting out a project plan, guiding you through the process and keeping you up to date with all the milestones and timelines involved.
You will have quality advice and assistance at all stages of the authorisation process, which includes preparation, filing and ongoing conduct of the application. We are all professionally qualified and experienced in this area of regulated business.
Our Expertise and Services also include:
Advising you on the FCA Regulated activities for which you will need FSMA Part IV permissions
Advising you on the different FCA Regulatory obligations specific to your Regulatory Activities
Advising you on the FCA Regulatory Capital obligations (the money you need to keep in reserve)
Advising you on the FCA competency requirements for senior management and other staff
Assisting you in the preparation of your Regulatory Business Plan (or creating one with you for an additional cost)
Assisting in the completion of the necessary forms, including ownership disclosure forms and FCA Approved Persons/Senior Management Function Forms
Advice on corporate governance, systems and controls
Providing you with practical and effective regulatory compliance documentation including required policy templates.
Finalise your Compliance Monitoring Programme (and set it up in Pathfinder, our software, if you select it)
Liaising with your other advisers and with the FCA
Project managing your Firm’s FCA application from start to finish
Additional services also provided are
Preparing your senior management for meetings with the FCA (if necessary)
Arranging for Trademark protection
Total Control From Day One – Pathfinder (our all-encompassing RegTech solution) – starting your regulated business activities in complete control of your compliance arrangements (includes free trial and training).
Training for all Senior Management and Staff in matters from Senior Managers responsibilities and accountabilities, FCA Code of Conduct, Anti-Money Laundering, Conflicts of Interest, KYC and many others.