UK Leads the Fight Against Money Laundering and Terrorism Financing, But Still Needs to Do More

David Drake By David Drake January 21, 2019 Off
money-laundering

Last month, the global watchdog, known as the Financial Action Task Force (FATF), released a report showing that digital currency exchanges in the UK are at a low risk of terrorist financing and money laundering.

For most players in the cryptocurrency space, the report is an affirmation of the emerging threat that these challenges pose for digital assets. In the UK, regulators plan to put in place comprehensive measures to counter terrorism financing and money laundering using cryptocurrencies.

In its report, the FATF recommended that the country enhances its understanding of risks associated with digital currencies. Previously, the UK had recognized vulnerabilities inherent within the cryptocurrency systems and declared that it is committed to implementing changes to address them.

Key Successes

The FATF conducted a comprehensive assessment to determine the extent to which the UK complies with FATF recommendations and effectiveness of its counter-terrorism financing and anti-money laundering systems. As the largest provider of financial services in the world, the FATF concluded that the UK has a robust and well developed regime to enable it combat these global vices.

The decision to describe the UK as a leader in the fight against terrorism financing and money laundering was informed by the fact that the country has taken significant steps in curbing these challenges. In its report, the FATF acknowledged that the country has a comprehensive understanding of the risks posed by the two vices as detailed in its 2015 and 2017 national risk assessments. At the same time, the FATF report noted that both the private and public sectors in the country are collaborating to address emerging threats on financing of terrorism and money laundering.

The agency termed the Joint Intelligence Task Force on Money Laundering in the UK as innovative. This task force allows for the sharing of information across private and public sectors, making it easier to identify as well as prioritize emerging threats. Other successes that the FATF registered in the UK included requirements for financial institutions and non-financial businesses meet counter terrorism financing and anti-money laundering requirements, as well as the prioritization of money laundering investigations.

More Action Required

But even with these successes, the UK still needs to do more to address the money laundering and terror financing problem within its borders. According to the FATF, the country needs to continue strengthening supervision activities and increase resource allocations to the financial intelligence unit.

They stated that it is not yet clear whether data generated via Suspicious Activity Reports was being utilized fully by investigators. The agency also raised questions over the quality of intelligence being generated by the country and the ability of the financial intelligence unit to share information across borders.

As a global agency tasked with setting standards for fighting terror financing and money laundering, the FATF has developed guidelines detailing operations of initial coin offerings (ICOs) and cryptocurrency exchanges. These guidelines are intended to encourage countries to develop cryptocurrency regulations in line with the efforts set up by G20 countries.

It is also a way of improving global coordination on regulation issues, as well as making the crypto space safer and better for all players involved.

Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.

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