The FCA has carried out its first operation with partners to disrupt illegal peer-to-peer crypto trading across multiple London locations.  It took the action under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

The FCA worked with HM Revenue & Customs (HMRC) and the South West Regional Organised Crime Unit, targeting eight premises suspected of illegal peer-to-peer crypto trading. The FCA issued cease and desist letters at each site, notifying traders to stop illegal activity immediately. Evidence obtained during the on-site inspections is supporting several ongoing criminal investigations.

Peer-to-peer trading is when individuals buy and sell crypto directly with each other, rather than using a centralised exchange and requires appropriate registration. There are currently no FCA registered peer-to-peer crypto traders or platforms operating in the UK.

The FCA has previously acted against unregistered cryptoasset activity in the UK, including prosecuting an individual operating an illegal network of crypto ATMs. In June 2024, the FCA worked with the Metropolitan Police Service to arrest two individuals suspected of running an illegal cryptoasset exchange.

The UK government’s National Risk Assessment of Money Laundering and Terrorist Financing outlines how cryptoassets are increasingly used to launder the proceeds of crime. The risk of money laundering through cryptoassets has increased significantly since 2020 with cryptoassets increasingly appearing in money laundering intelligence over this period. Cryptoassets are increasingly used for laundering all forms of proceeds of crime. In addition, there have been increasing levels of cryptoassets obtained through illicit means such as cybercrime, ransomware and cryptoasset thefts which are then laundered. The Economic Crime and Corporate Transparency Act introduced additional powers for law enforcement, so they can more quickly and easily seize and recover cryptoassets which are the proceeds of crime or associated with illicit activity such as money laundering, terrorist financing, fraud and ransomware attacks.

For firms seeking registration under the MLRs and in future under the authorisation regime, the FCA will consider these risk factors when assessing whether an applicant is ready to operate in a compliant way. In practical terms, applicants should be prepared to evidence (with tailored documentation and clear implementation plans) a robust business-wide risk assessment, effective customer onboarding and verification, ongoing monitoring (including blockchain analytics/transaction monitoring where relevant), well-defined governance, appropriate resourcing and training, and clear procedures for escalation and SAR reporting. The FCA will expect controls to be proportionate to the firm’s specific products, customer base and delivery channels – and to be demonstrably workable in day-to-day operations, not just on paper.

This FCA operation is an important development showing how regulation is developing to protect consumers in parallel to the more established civil law recovery routes including, search orders, discovery applications and worldwide freezing orders against known and unknown crypto fraudsters and exchanges