The Financial Conduct Authority (FCA)’s Annual Report and Accounts 2020-2021 publication shows that the organization received 2,754 individual allegations of misconduct over the last year, including fraud, compliance, and money-laundering complaints.
Analyzed by thinktank Parliament, the data shows that these allegations were provided by 1,046 whistleblowers, with 184 firms and individuals under investigation and £189.8 million handed down in financial penalties, the FT Adviser reports.
This was also the first full financial year that the FCA was responsible for accessing anti-money laundering measures of crypto-asset businesses, which represent an elevated risk of financial crime. The regulator issued a warning in the summer of 2020 that a “significantly high number” of such companies were not meeting money laundering standards.
Wayne Johnson, chief executive of Encompass Corporation, commented on the findings, saying that more individuals have been trying to use the pandemic to conduct a financial crime, which is why it’s essential that the FCA takes the appropriate steps to tighten control and increase the visibility of new sectors and payment technology like cryptocurrencies.
He was quoted by the news source as saying: “But the fight against financial crime can’t be won by the regulators alone, and businesses from all sectors must improve the efficiency and effectiveness of their onboarding processes, compliance, and due diligence, not just for the sake of ‘ticking boxes’ and averting regulatory fines, but to help prevent even more financial crime and dirty money running through critical businesses and infrastructure.”
How do criminals use cryptocurrency for financial crime?
Digital currencies deliver benefits for governments, companies, financial organizations, and individuals by improving access to financial products and reducing the risk of corruption and fraud, but they can also be used by criminals to further their own ends, as well.
Because of the anonymous nature of digital currencies, it’s harder for regulators and law enforcement agencies to identify different transactions and trace them back to individual users. Such technological innovations mean it’s now easier than ever for criminals to hide the original source of their proceeds and easier to move funds without being detected.
Once these anonymous cryptocurrency payments have been made, they then need to be turned into actual cash - which is where Treasure Men come in. As the FT explains, these are people listed on Hydra (part of the dark web, which is invisible to search engines) who leave cash in a chosen location and give out coordinates so it can be found.
The site also provides other avenues for criminals to benefit from cryptocurrencies, whether that’s by exchanging bitcoin for iTunes vouchers, prepaid debit cards, gift vouchers, and so on.
However, because all transactions in a cryptocurrency are recorded on a blockchain, those with the expertise can detect the trail - which has led to the rise of various crypto forensics companies, helping law enforcement track criminal groups.
To find out how we can help provide you with the most up-to-date security, compliance, and AML assurances possible, head over to our Crime and Compliance section.