By 
The Financial Conduct Authority (FCA) faced delays in registering crypto-asset firms under money laundering regulations in 2021 due to a shortage of crypto skills, as highlighted in a report by the National Audit Office (NAO). The scarcity of qualified personnel in the crypto domain has hindered the FCA’s ability to efficiently address emerging challenges and retain staff with the requisite expertise.
According to the NAO report, the FCA encountered a significant backlog in registering crypto-asset firms, leading to delays in enforcing anti-money laundering regulations. Despite dealing with over 1,400 cases related to unauthorized crypto-asset activity, there has been a discernible gap between issue identification and regulatory action.
Crypto-related scams witnessed a surge, with reported cases rising from over 3,150 in 2020 to exceeding 6,300 in 2021 and more than 3,900 in the first half of 2022. The FCA’s response time to these incidents has been impeded by the skills shortage in the crypto space.
The report emphasized instances where the FCA necessitates additional powers or legislative approvals to take action effectively. For example, it was only in February 2023 that the FCA commenced enforcement actions against illegal operators of crypto ATMs, despite having mandated compliance with anti-money laundering regulations since January 2020.
To adapt to an expanded scope, the FCA increased its staffing by 16% and allocated £317 million to a two-year change management program. Future initiatives include upgrading its ‘data lake’ for seamless data sharing and establishing a ‘single view’ platform for frontline staff to access vital information on firm performance.
The NAO’s recommendations include urging the FCA to ensure operational processes align with ongoing changes, collaborating with HM Treasury and stakeholders to assess the effectiveness of new accountability arrangements, and delivering a core set of performance metrics to stakeholders by autumn 2024.
Gareth Davies, head of the NAO, stressed the need for the FCA to develop a long-term workforce plan to address the skills shortage and optimize its use of data for enhanced regulatory outcomes. He underscored the importance of prioritizing activities and maintaining transparency about the FCA’s objectives amid ongoing reforms in response to evolving financial regulatory frameworks.
Comments