On October 3, 2018, the Financial Conduct Authority published a report on the outcome of its thematic review into money laundering and terrorist financing risks in the e-money sector. The report focuses on e-money products, including prepaid cards and digital wallets. The FCA assessed the anti-money laundering and counter-terrorist financing controls of 13 authorized Electronic Money Institutions and registered small EMIs. The review included consideration of business models that involve distributing e-money through agents and distributors.
The FCA's review did not cover activities that are not regulated by the FCA (for instance, gift cards that can be used only within a limited network or prepaid products denominated in a cryptocurrency) or money remittance services provided by the EMIs.
The FCA found that the majority of EMIs had effective AML and CTF controls in place and had implemented the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. In addition, transaction monitoring was considered to be effective and mostly based on automated technological solutions. Where EMIs had outsourced distribution of e-money through agents, the FCA found that most of the EMIs had adequate governance and audit measures to manage the risks.
Nonetheless, the FCA noted that, despite progress in AML and CTF controls, certain weaknesses had been identified and that firms should remain vigilant.
The report is available at: https://www.fca.org.uk/publication/thematic-reviews/tr18-3.pdf.
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