Crypto Laundering a 'Material Risk' for UK Ahead of FATF Review: RUSI

Britain's new crypto rules will still be in transition when global anti-money laundering assessors arrive next year, and the country will be judged on whether it can enforce against crypto laundering, a taskforce convened by the Royal United Services Institute has warned.

The report, published on Friday, sets out the issues the London-based defense and security think tank's taskforce expects to dominate the UK's 2027 evaluation by the Financial Action Task Force (FATF). The Paris-based body sets global standards against money laundering and terrorist financing, and its peer reviews, known as mutual evaluations, grade countries on whether their rules work in practice.

The UK's report is due to be agreed at FATF's February 2028 plenary. The taskforce, made up of experts from the private sector, law enforcement and civil society, met in September; its discussions are not attributed to individual members.



A first test for crypto

This will be the first UK evaluation in which FATF considers crypto, and the taskforce was clear that crypto is a "material risk" for the UK. The City of London Police assesses that 66% of investment fraud in the UK involves crypto, according to the report, while the UK's 2025 National Risk Assessment rated crypto money laundering 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 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.

FCA Finalizes Landmark Crypto Rules to Make UK a 'Global Hub'

The taskforce doubted the UK would be able to show adequate implementation by the time FATF visits in June, and said the UK had moved more conservatively than Hong Kong, the EU and Singapore.

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.

Enforcement gaps

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. But one member said the success had not been repeated in enough cases, and that the UK had barely scratched the surface of crypto laundering. FATF is expected to test whether results match the risk rather than rest on one headline case, the report said.

It also warned that because the UK's regime, which resembles the EU's Markets in Crypto-Assets Regulation, focuses on identifiable crypto firms, it risks pushing the highest-risk crypto outside the FCA's perimeter. That would leave law enforcement to trace assets the regulator cannot reach, such as Tether's USDT, with the taskforce pointing to a July 2025 Treasury report that flagged the stablecoin as having been "extensively exploited" by Russian-speaking laundering networks. Members doubted law enforcement had been given the capability and resources to keep pace.

The taskforce did praise UK international cooperation, including Operation Destabilise, which targeted Russian-speaking networks converting street cash into crypto. But it flagged resourcing of the UK Financial Intelligence Unit and law enforcement's economic crime capacity as likely vulnerabilities.

Ban on Crypto Privacy Tools Would Be Counterproductive: UK Think Tank

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 DeFiplatforms.

RUSI has previously argued that banning crypto privacy tools would be counterproductive, and in August reported that North Korea increasingly launders stolen crypto through criminal networks. The taskforce will meet again this month to examine trends from recent evaluations.