LONDON—The United Kingdom’s Financial Conduct Authority (FCA) has issued a "final warning" to firms promoting cryptoassets to U.K. consumers, telling the companies to prepare for a “cryptoassets financial promotion regime.”
Separately, the FCA has also taken several actions related to AML failures by fintechs, including assessing fines.
The regime aims to protect consumers from promotions that make exaggerated claims about the benefits in investing in cryptoassets, according to a report by Reynolds Porter Chamberlain.
Under the new regime, unauthorized cryptoassets firms that are not registered with the FCA under money laundering regulations can only communicate financial promotions that have been approved by an authorized person or those falling within specific exemptions, Reynolds Porter Chamberlain explained.
Key Elements
According to Reynolds Porter Chamberlain, the new rules contain the following key elements:
- Tougher regulations on advertising. The FCA will enforce stricter rules to ensure that promotions related to cryptoassets are clear, fair and non-misleading
- Comprehensive risk disclosures. The FCA has said there will be a stronger emphasis on providing investors with comprehensive risk disclosures. “This ensures that investors are fully informed about the potential risks associated with investing in cryptoassets,” the organization said.
- Prohibition of incentivization. The new rules will prohibit the use of incentives to entice investors to invest in cryptoassets. This includes bonuses, additional "free" cryptoassets or any form of incentivization
‘High Levels of Accuracy’
“Financial services professionals, especially those engaged in disseminating promotional material related to cryptoassets or advising on them, will have to tread carefully, ensuring adherence to the new FCA rules,” Reynolds Porter Chamberlain said. “They must maintain high levels of accuracy, clarity and fairness when presenting any promotional information or advice to consumers.”
‘Aggressive Steps’
Separately, the FCA has slapped a commodities broker with a massive fine for anti-money laundering (AML) failures, Be In Crypto reported.
Though based in New York City, ADM Investor Services International has received a $7.8 million fine from the U.K. financial regulator.
“The regulator has serious concerns about the potential for the misuse of ADM’s services for money laundering,” Be In Crypto said.
This is partly a function of the firm’s geographical breadth, the FCA said. But it also has to do with the preponderance of high-risk clients and “Politically Exposed Persons” in the company’s client base, according to an FCA statement. The FCA alleges practices that breach Principle 3 of its “Principles for Business.”
‘Not the First Time’
“Nor is this the first time that the FCA has raised concerns with ADM. Back in 2014, the FCA raised concerns. In particular, the FCA took issue with the lack of an internal system at ADM for classifying customers by risk level,” Be In Crypto added.
Regulator, App are in Talks
In addition, financial app Revolut is reportedly also in talks with the FCA over alleged anti-money laundering failures, Fintech Futures reported.
The fintech reportedly allowed funds to be released from accounts that were flagged as suspicious by the National Crime Agency (NCA), with as much as £1.7 million going from those accounts between July and August, according to two sources with knowledge of the matter, Fintech Futures said.
String of Concerns
“The news is the latest in a string of concerns that have hit Revolut, marking 2023 as a turbulent year for a fintech once deemed as a leading figure in the U.K. fintech scene,” Fintech Futures said.
Its current reported failures follow organized criminals exploiting discrepancies in Revolut’s U.S. and European payment systems to steal more than $20 million in funds back in July, Fintech Futures noted.
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