UK Tightens Grip: New Anti-Money Laundering Rules Target Crypto Firms

Crypto's wild west era faces another regulatory showdown as British authorities push for stricter oversight.

THE CRACKDOWN INTENSIFIES

Whitehall mandarins draft sweeping compliance requirements that would force digital asset firms to implement robust customer verification systems—no more anonymous trading. The proposed framework mandates real-time transaction monitoring and enhanced due diligence procedures that traditional finance has endured for decades.

INDUSTRY PUSHBACK EXPECTED

Crypto exchanges and wallet providers prepare for compliance costs that could squeeze smaller players out of the market. Banking-style reporting requirements threaten to erase the sector's famous pseudonymity—because nothing says 'financial innovation' like replicating legacy systems with extra steps.

REGULATORS PLAY CATCH-UP

The move follows global pressure to prevent digital assets from becoming the new Swiss numbered accounts. One Treasury insider quipped they're finally treating crypto like the financial service it claims to be—with all the paperwork that entails.

Another compliance headache for an industry that still can't decide whether it wants to revolutionize finance or just avoid taxes. How very bullish.

Tighter Oversight of Crypto Ownership and Control

One of the biggest changes targets how the Financial Conduct Authority looks at who controls a crypto firm. Right now, the focus is mainly on beneficial owners, which can miss people who actually call the shots. The updated rules expand that definition to include anyone with real authority and require them to meet a “fit and proper” standard. The threshold for reporting a change in control WOULD also drop from 25 percent to 10 percent. That puts crypto firms on the same footing as others in the financial system and gives regulators a better chance to step in early if needed.

Stronger Checks on Banking Relationships

The proposals also take aim at how crypto firms work with correspondent banks, especially those overseas. These relationships are often the LINK between crypto businesses and traditional financial networks. The new rules would require crypto firms to do more thorough background checks on these banking partners and avoid working with shell banks altogether. This is meant to reduce the risk of money slipping through poorly regulated systems.

More Precision in Customer Risk Checks

Customer due diligence is getting a more focused approach, too. Right now, firms often apply enhanced checks across the board just to be safe. The new rules suggest applying only those deeper checks when a transaction is unusually large or complex, or when it involves countries flagged as high risk. The idea is to let firms concentrate their resources where the risk is real, instead of burning time and money on low-risk situations.

Greater Transparency for Trusts

Trusts linked to crypto firms are also part of the update. The new rules would expand which types of trusts that need to register with the UK’s Trust Registration Service. At the same time, they would ease up on lower-risk setups, like small-value trusts or those used for estates. It’s a MOVE toward better visibility without dragging simple arrangements into unnecessary paperwork.

Necessary Updates for Digital Practices

There’s also a practical switch in currency. Monetary thresholds are being updated from euros to pounds so they actually reflect how UK businesses operate. Alongside that, new guidance is expected to help firms with digital identity checks, which are becoming more common in compliance workflows.

A Clear Timeline for Feedback and Action

The public has until the end of September to share feedback on the draft. Once that window closes, the rules are expected to head to Parliament early next year. If passed, new guidance will follow to help crypto businesses adjust to the updated framework.

Next Steps for the UK Crypto Scene

These changes show the UK is moving to treat crypto with the same seriousness as traditional finance. Stronger checks, more transparency, and clearer rules are all part of the direction regulators are heading in. Crypto firms will need to keep pace as the UK locks in a more structured approach to digital asset oversight.

Key Takeaways

• The UK Treasury has proposed new anti-money laundering rules that specifically tighten oversight of crypto firms and their controllers.
• The definition of control will expand, and the reporting threshold for ownership changes will drop from 25% to 10%, giving regulators more visibility.
• Crypto firms will need to conduct stronger checks on correspondent banking relationships, especially with offshore or shell banks.
• Customer due diligence rules will become more targeted, focusing enhanced checks on high-risk countries or unusually large and complex transactions.
• Trust registration and identity checks will also be updated, with thresholds now set in pounds and new digital ID guidance to support compliance.