The Financial Conduct Authority has seen an increasing number of crypto firms achieve registration, according to Steve Smart, joint executive director of enforcement and market oversight.
Speaking at the City and Financial Global, Financial Services Investigations and Enforcement Summit yesterday (June 26), Smart discussed how the FCA was as much a law enforcement agency as it was a regulator.
He said: “When it comes to countering financial crime, we are in many respects a law enforcement agency as well as a regulator.
"We must stay a step ahead of the criminals, whether it is to pre-empt the way they use new technology such as AI and deep fakes or whether it is to work together with the firms we regulate, to ensure their systems and controls keep a step ahead of those seeking to exploit them.”
One tool to prevent financial crime was through the authorisation of firms with Smart saying this was the key to high standards.
“Through a rigorous process, we check that firms have the right systems and controls in place, underpinned by sound business models, before they can be approved.
“This is to prevent potential harm to the wider system. We make no apologies for high standards but we do recognise that our processes in the past have been slower than we would like.
"That is why we have worked hard to eliminate our operational backlog and are holding ourselves accountable to help reduce unnecessary delays at the gateway,” he added.
As an example of this Smart highlighted that 86 per cent of initial crypto registrations the FCA received were rejected, withdrawn or refused because they failed to meet the appropriate standards of the anti-money laundering framework.
He said: “However, by working with potential entrants and supporting firms to navigate this process, we are seeing more crypto firms achieving registration under the money laundering regulations, with a total of 44 firms now registered. ”
Data sharing initiatives
Smart said the FCA was “strongly encouraging” firms and cross-sector partners to participate in data sharing initiatives to prevent harm.
“Not all alleged breaches of regulation or the law are easy to spot. We cannot do our detective work alone. Criminals will always pivot to exploit the weakest firms and sectors, so sharing data and intelligence is a vital tool in strengthening our defences.
“We work with the police, other law enforcement agencies and regulators to develop better intelligence sharing and prioritisation. This allows us to identify fraud networks whether they are home-grown and operating domestically or are part of a complex, cross-border web.”
Smart mentioned how the FCA had issued guidance clarifying the obligations for firms and others, including influencers when using social media for financial promotions.
“It is worth remembering that promotions aren’t just about the likes, they’re about the law,” he warned.
Intelligence led organisation
Smart believed whether the FCA was dealing with crime or regulatory breaches, to be successful in proactively identifying harm and disrupting it, it needed to be an “intelligence led organisation”.
