Crypto Laundering a 'Material Risk' for UK Ahead of FATF Review: RUSI
A UK taskforce convened by RUSI has warned that cryptocurrency laundering poses a 'material risk' to the country ahead of its 2027 Financial Action Task Force evaluation.
The UK's new cryptocurrency regulations will still be in transition when global anti-money laundering assessors arrive next year, leaving the country vulnerable to criticism over its ability to combat crypto laundering, according to a taskforce convened by the Royal United Services Institute (RUSI).
First crypto evaluation
This will be the first UK evaluation in which FATF considers cryptocurrency, and the taskforce was clear that crypto represents a 'material risk' for the UK. The City of London Police assesses that 66% of investment fraud in the UK involves crypto, while the UK's 2025 National Risk Assessment rated crypto money laundering as high risk, up from medium in 2020.
The UK brought crypto firms under its money laundering rules in 2020, and legislation passed in February created a statutory crypto regime. The Financial Conduct Authority (FCA) set out which crypto activities it will regulate in April and finalized its rulebook in June, but the mandatory regime does not take effect until October 25, 2027.
Enforcement concerns
The taskforce doubted the UK would be able to show adequate implementation by the time FATF visits in June, noting that the UK had moved more conservatively than Hong Kong, the EU and Singapore. Members pointed to over-the-counter brokers, which the National Crime Agency estimated in the 2025 risk assessment are likely to launder hundreds of millions of dollars a year.
Members were unanimous that assessors would examine this, and pointed to over-the-counter brokers, which the National Crime Agency estimated in the 2025 risk assessment are likely to launder hundreds of millions of dollars a year.
The taskforce cited the Metropolitan Police's £5.5 billion (about $7.3 billion) crypto seizure, linked to a Chinese professional money launderer sentenced in 2025, as an encouraging sign of what the UK criminal justice system can do when it has the capacity. However, one member noted that this success had not been repeated in enough cases.
The report warned that because the UK's regime resembles the EU's Markets in Crypto-Assets Regulation and focuses on identifiable crypto firms, it risks pushing the highest-risk crypto outside the FCA's perimeter. This would leave law enforcement to trace assets the regulator cannot reach, such as Tether's USDT, which was flagged in a July 2025 Treasury report as having been 'extensively exploited' by Russian-speaking laundering networks.
International cooperation
The taskforce did praise UK international cooperation, including Operation Destabilize, which targeted Russian-speaking networks converting street cash into crypto. However, it flagged resourcing of the UK Financial Intelligence Unit and law enforcement's economic crime capacity as likely vulnerabilities.
FATF has been pressing countries on crypto enforcement more broadly. In July, it said nearly 93% of jurisdictions it surveyed had yet to apply its standards to qualifying DeFi platforms. The taskforce will meet again this month to examine trends from recent evaluations.
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