The Financial Conduct Authority (FCA) has faced criticism from the National Audit Office (NAO) over a delay to ensuring crypto asset firms comply with anti-money laundering (AML) regulations.

A new report by the watchdog examined how well placed the FCA was to respond to the changes being seen in the UK’s financial services sector such as in the rise of Buy Now, Pay Later and cryptocurrency.

NAO noted that some change responses require parliamentary approval.

However, it observed “significant delays” over the FCA’s response to some issues, stating that even where the FCA does have power to act, moving to enforcement can take time.

“While the FCA has required crypto-asset firms to comply with anti-money laundering regulations since January 2020, and began supervision work including engaging with unregistered firms, it did not begin taking enforcement action against illegal operators of crypto ATMs until February 2023,” it said.

The watchdog suggested in its report that a skills shortage meant the FCA took “longer than planned” to register crypto-asset firms under money laundering regulations and therefore begin clamping down on crypto ATMs.

The report also noted the FCA was aware it needed to maintain specialist skills to avoid causing delays in its work and that it recognised a need to maintain specialist skills in areas where voluntary staff turnover remained high.

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