The letter, entitled “Cryptoassets And Financial Crime,” begins by noting that emerging evidence of “the scope of cryptoassets to be used for criminal purposes” means that banks require advice on best practice in dealing with the risks associated with the new asset class.
Among the steps listed in the letter, the FCA advises banks to perform proper due diligence checks, and to look to:
“developing staff knowledge and expertise on cryptoassets to help them identify the clients or activities which pose a high risk of financial crime”
Adding with respect to the frenetic ICO market:
“ for clients which are involved in ICOs, considering the issuance’s investor-base, organisers, the functionality of tokens (including intended use) and the jurisdiction.”
While the letter does acknowledge that there “exist many non-criminal motives for using cryptoassets,” the body lists high risk indicators that should encourage greater scrutiny from banks – including retail customers investing large sums into ICO investments – who are most at risk of investment fraud.
ICO Growing Pains
This last warning is particularly apt at a time when fraudulent and speculative ICOs seem to be rampant.
With the SEC recently launching a fake ICO – complete with a website, team and whitepaper – as a warning to would-be investors, a move from such a prominent regulatory voice in Europe will hopefully encourage banks to help shore up the fledgling ICO market.