Guide for Submitting the Yearly Financial Report for UK Based Cryptoasset Enterprises (Updated: 15th February, 2022)
UK Cryptoasset Businesses Face Expanded Financial Crime Reporting Obligations
As of March 30, 2022, UK cryptoasset businesses regulated by the Financial Conduct Authority (FCA) are required to comply with expanded reporting requirements related to financial crime. This is primarily through the FCA's supervisory framework and reporting obligations under anti-money laundering (AML) and sanctions regulations.
Registration and Supervision
Cryptoasset exchange providers and custodian wallet providers have been required to register with the FCA for AML supervision since January 2020. Firms carrying out activities such as exchanging cryptoassets for fiat or other cryptoassets, operating crypto ATMs, or providing custodian wallet services are regulated under this framework.
Annual Financial Crime Report and Sanctions Reporting
Cryptoasset firms are required to submit financial crime-related reports such as Suspicious Activity Reports (SARs) to the National Crime Agency (NCA) and to notify the FCA about suspicious transactions or breaches. Since August 2022, cryptoasset firms are classified as “relevant firms” under UK sanctions regulations, mandating mandatory reporting to the UK's Office for Financial Sanctions Implementation (OFSI) if they know or suspect dealings with a UK-designated person or sanctions breach.
Key Reporting Elements
When reporting to OFSI or the FCA, firms must include detailed transaction information such as wallet addresses, transaction hashes, values, and links to designated persons identified using blockchain analytic tools. Firms are also required to provide information on operating jurisdictions, customer information, and compliance information.
Additional Compliance Recommendations
Firms are urged to adopt a risk-based approach, train staff on sanctions red flags, employ blockchain analytics for transaction monitoring, improve due diligence on counterparties, and maintain robust controls for asset freezes and sanction compliance.
Expanded Reporting Obligations
The UK Financial Conduct Authority (FCA) extended Annual Financial Crime reporting obligations to approximately 7,000 businesses, effective March 30th, 2022. The FCA has published special Directions setting out the REP-CRIM return requirements for cryptoasset businesses. The REP-CRIM requires reporting on exposure to politically exposed persons (PEPs), sanction screening controls, jurisdictional risks, suspicious activity reports, resources to fight financial crime, and fraud risks.
Submission and Deadline
The REP-CRIM return must be submitted using appropriate online systems, such as RegData. The first Annual Financial Crime Report for cryptoasset businesses must be submitted within 60 business days of their account referencing date, following the Directions coming into force on March 30th, 2022.
Group Submissions and Opinions
A single REP-CRIM return may be submitted for a group of companies, but only when each company within the group is subject to the same requirements. Companies can express their opinions regarding the three most prevalent frauds-indicating fraud typology, suspected perpetrators and primarily victims-and whether they increased, decreased or remained the same.
Preparation for Compliance
All cryptoasset businesses operating in the UK must be ready to provide all the required information by March 30, 2022. It is crucial for these businesses to understand and comply with these expanded reporting obligations to maintain regulatory compliance and prevent financial crime within the cryptoasset sector.
- In light of the expanded financial crime reporting obligations issued by the UK Financial Conduct Authority (FCA), it is crucial for all UK cryptoasset businesses, especially those regulated by the FCA, to understand their business operations lie within the realm of technology and finance, as they are required to submit detailed transaction information and comply with anti-money laundering (AML) and sanctions regulations.
- As a result of the extended reporting obligations set by the FCA, UK cryptoasset businesses have to prepare themselves to thrive in a business environment where technology, finance, and compliance intersect, with an emphasis on areas like risk management, staff training, and the adoption of blockchain analytics for transaction monitoring.
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