Crypto Laundering a Material Risk for UK Ahead of FATF Review

A taskforce convened by the Royal United Services Institute (RUSI) has warned that cryptocurrency represents a "material risk" for the United Kingdom ahead of its 2027 evaluation by the Financial Action Task Force (FATF). The warning comes as the UK's full crypto regulatory regime is not scheduled to take effect until October 25, 2027, while FATF assessors are expected to visit in June of that same year.

Enforcement Concerns

According to the report, the UK will be judged on its ability to enforce rules against crypto laundering. The City of London Police estimates that 66% of investment fraud in the UK involves cryptocurrency. Furthermore, the UK's 2025 National Risk Assessment upgraded the risk level of crypto money laundering from medium in 2020 to high.

Regulatory Gaps

The taskforce expressed concern that the UK's regime, which focuses on identifiable firms, could push high-risk activities outside the Financial Conduct Authority's (FCA) perimeter. This would leave law enforcement to trace assets the regulator cannot reach. The report specifically highlighted a July 2025 Treasury report stating that Tether's USDT has been "extensively exploited" by Russian-speaking laundering networks.

Law Enforcement Capacity

While the taskforce noted a £5.5 billion (approximately $7.3 billion) crypto seizure by the Metropolitan Police linked to a Chinese money launderer as a positive sign, members argued such success has not been repeated frequently enough. The report also flagged the resourcing of the UK Financial Intelligence Unit and general economic crime capacity as potential vulnerabilities.

Key facts

• FATF assessors visit the UK in June 2027; full crypto rules take effect October 25, 2027.
• 66% of UK investment fraud involves cryptocurrency, per City of London Police.
• UK 2025 National Risk Assessment rated crypto money laundering as high risk.
• The Metropolitan Police previously seized £5.5 billion in crypto linked to a Chinese launderer.