1The FCA will notify the subject of the investigation that it has appointed officers to carry out an investigation under the Money Laundering Regulations and the reasons for the appointment, unless notification is likely to prejudice the investigation or otherwise result in it being frustrated. The FCA expects to carry out a scoping visit early on in the enforcement process in most cases. The FCA's policy in civil investigations is to use powers to compel information in the same way as it would in the course of an investigation under the Act.
3Where the FCA considers it appropriate to do so, it will exercise its powers under regulation 74C of the Money Laundering Regulations, to impose a direction on a cryptoasset business to ensure requirements of the Money Laundering Regulations are met. The FCA will exercise this power where:
the imposition of a direction may assist the cryptoasset business to take steps which would otherwise be difficult because of legal obligations owed to third parties.
3Examples of circumstances in which the FCA will consider imposing a direction on a cryptoasset business because it has serious concerns about a cryptoasset business, or about the way its business is being or has been conducted include where the cryptoasset business appears to be failing, or appears likely to fail, to comply with requirements under the Money Laundering Regulations, because:
it appears to have consistently failed to comply with requirements of the Money Laundering Regulations and in doing so, it may have put itself at risk of being used for the purposes of money laundering or terrorist financing;
its personnel do not appear to have adequate skills and experience to carry on cryptoasset business; or
it appears to have breached requirements imposed on it by or under the Money Laundering Regulations, for example in respect of disclosure requirements about the applicability of the jurisdiction of the Financial Ombudsman Service to its cryptoasset business and whether it is subject to FSCS protection.
the information available to it indicates serious concerns about the cryptoasset business that need to be addressed immediately; and
circumstances indicate that it is appropriate to impose a direction immediately to require and/or prohibit certain actions by the cryptoasset business to ensure the cryptoasset business addresses these concerns.
3The FCA will consider the full circumstances of each case when it decides whether an urgent imposition of a direction is appropriate. The following is a non-exhaustive list of factors the FCA may consider:
The extent of any loss, or risk of loss, or other adverse effect on consumers caused by the failure to adhere to the Money Laundering Regulations. The more serious the loss or potential loss or other adverse effect, the more likely it is that the urgent imposition of a direction will be appropriate, to protect the consumers’ interests.
The extent to which customer assets appear to be at risk due to the failure to comply with the Money Laundering Regulations. Urgent imposition of a direction may be appropriate where the information available to the FCA suggests that customer assets held by, or to the order of, the cryptoasset business may be at risk.
The nature and extent of any false or inaccurate information provided by the cryptoasset business. Whether false or inaccurate information warrants the urgent imposition of a direction will depend on matters such as:
the impact of the information on the FCA’s view of the cryptoasset business’s compliance with the requirements of the Money Laundering Regulations, or the likelihood that the cryptoasset business may be being used in connection with financial crime;
whether the information appears to have been provided in an attempt knowingly to mislead the FCA, rather than through inadvertence;
The seriousness of any suspected breach of the requirements of the Money Laundering Regulations and the steps that need to be taken to correct that breach.
The risk that the cryptoasset business may be used or has been used to facilitate financial crime, especially money laundering and terrorist financing. The information available to the FCA, including information supplied by other law enforcement agencies may suggest the cryptoasset business is being used for, or is itself involved in financial crime. Where this appears to be the case, and the cryptoasset business appears to be failing to comply with requirements of the Money Laundering Regulations or has put its customers’ interests at risk, the FCA’s urgent imposition of a direction may be appropriate.
the cryptoasset business’ past history, management ethos and compliance culture;
steps that the cryptoasset business has taken or is taking to address the issue.
The impact that the imposition of a direction will have on the cryptoasset business’ business and on its customers. The FCA will need to be satisfied that the impact of any use of the direction power is likely to be proportionate to the concerns being addressed, in the context of the overall aim of achieving its statutory objectives.
3Examples of directions that the FCA may consider imposing in support of its enforcement function are: a direction not to take on new business; a direction that prohibits the disposal of, or other dealing with, any of the cryptoasset business’ assets (whether in the United Kingdom or elsewhere) or restricts those disposals or dealings; and a direction that all or any of the cryptoasset business’ assets, or all or any assets belonging to consumers but held by the cryptoasset business to its order, must be transferred to a trustee approved by the FCA.
1When imposing or determining the level of a financial penalty under regulation 76 of the Money Laundering Regulations2, the FCA's policy includes having regard, where relevant, to relevant factors in DEPP 6.2.1G and DEPP 6.5 to DEPP 6.5D. The FCA may not impose a penalty where there are reasonable grounds for it to be satisfied that the subject of the proposed action took all reasonable steps and exercised all due diligence to ensure that the relevant requirement of the Money Laundering Regulations would be met. In deciding whether a person has failed to comply with a requirement of the Money Laundering Regulations, the FCA must consider whether he or she2 followed any relevant guidance which was issued by a European Supervisory Authority in accordance with articles 17, 18.4 or 48.10 of the Fourth Money Laundering Directive, with article 25 of the Funds Transfer Regulation, or with any relevant guidance which was issued at the time by2 a supervisory authority or other appropriate body, including the2 Joint Money Laundering Steering Group2.
2When cancelling, suspending or restricting an authorisation or limitation under regulation 77 of the Money Laundering Regulations or determining the duration of any such suspension or restriction, and when imposing or determining the duration of a prohibition under regulation 78 of the Money Laundering Regulations, the FCA’s policy includes having regard, where relevant, to relevant factors in DEPP 6A.
1As with cases under the Act, the FCA may settle or mediate appropriate cases involving civil breaches of the Money Laundering Regulations or the Funds Transfer Regulation2 to assist it to exercise its functions under the Money Laundering Regulations2 in the most efficient and economic way. The settlement discount scheme set out in DEPP 6.7 applies to penalties, suspensions, restrictions and temporary prohibitions2 imposed under regulations 76, 77 and 78 of2 the Money Laundering Regulations.