Recommendation 47

HM Government · verbatim extract Not Addressed

The Temporary Registration Regime (TRR) for existing cryptoasset businesses was established in December 2020 to allow existing cryptoasset firms, which applied for registration before 16 December 2020, and whose applications were still being assessed, to continue trading. A total of 106 firms applied to the TRR. We have been reviewing cryptoasset firms’ applications carefully to ensure they meet the minimum standards we expect – that those who run these firms are fit and proper and that they have adequate systems to identify and prevent flows of money from crime. These are in place so our financial system is not open to abuse by those who want to move and hide money made from violence, drugs, corruption or the exploitation of others. That is why we put in place a rigorous process for assessing applications and, despite allocating considerable resources, that rigour has taken time, especially as many firms were not used to regulation and, in some cases, reluctant to cooperate. A large proportion of firms, around 80%, were unable to meet the required standards. These standards are essential in maintaining the integrity of the UK financial system. We have now registered 33 firms. Throughout the registration process when we decide a firm does not meet the standard for registration, we are clear with them where they are going wrong. The Money Laundering Regulations do not include a provision allowing firms to withdraw their applications. However, in some cases, we may allow a firm to withdraw, stop operating, make the changes necessary following our feedback and reapply. Firms that do not withdraw are issued a formal decision which they are able to appeal, including through the court. All firms with temporary registration are required to comply with the Money Laundering Regulations and are subject to supervision by us. We have concluded our assessments of all firms in the TRR and it closed on 1 April, for all but 6 firms where it is strictly necessary to continue to have temporary registration. This is necessary where more time is required for them to provide representations to support appeals already in progress, or where strictly necessary for the winding-down arrangements. The FCA supports innovation and promotes a welcoming environment for UK business that meet our standards. We continue to see new cryptoasset firms applying at the gateway, despite the number of firms that have been unable to meet the required standards. We have increased our focus on those applications. NIKHIL RATHI, CHIEF EXECUTIVE 1 April 2022 I am writing in response to the Treasury Select Committee’s report Economic Crime, published on 2 February 2022. The PSR welcomes the opportunity to provide both written and oral evidence to the Committee, and we have read the report with great interest. As the regulator responsible for protecting people and businesses when they use payment systems, we are focused on ensuring that more is done to prevent authorised push payment (APP) scams, and to protect people who fall victim. We are developing coordinated action with a range of different parties, including financial institutions, other regulators, Pay.UK, the Lending Standards Board (LSB) and the Financial Ombudsman Service. The report makes several recommendations for the PSR. This letter sets out our response and, where appropriate, describes our next steps towards implementation. People are losing life-changing sums of money to APP scams. Although there have been significant steps taken in the fight against these scams, more must be done. The scale and significant increase in APP fraud means urgent action is needed to protect consumers and make it harder to commit these crimes. Our annual plan explains how we are looking at more ways to protect people.