A shortage of crypto skills meant the FCA took longer than planned to register crypto-asset firms under money laundering regulations in 2021, and it still finds it difficult to recruit and retain staff with these skills, acording to a report by the National Audit Office (NAO).
The regulator told the bean-counting authority that it had dealt with more than 1,400 cases relating to unauthorised crypto-asset activity. In 2020, more than 3,150 crypto-asset scams were reported, rising to over 6,300 in 2021, and more than 3,900 in the first half of 2022.
The NAO report found that there can be a significant delay between the FCA identifying an issue and it taking action.
For instance, while the FCA has required crypto-asset firms to comply with anti-money laundering regulations and engaged with unregistered firms since January 2020, it did not begin taking enforcement action against illegal operators of crypto ATMs until February 2023.
In other case, the FCA requires additional powers to act, such as needing legislation approved by Parliament before it can impose conduct standards on Buy Now Pay Later credit providers.
In adapting to a wider remit, the financial services watchdog has increased overall staffing by 16% and spent £317m on a two-year change management programme. Upcoming initiatives include an upgrade to its ‘data lake’ which stores all FCA data and enables the sharing of data across the organisation, and the creation of a ‘single view’ platform for all frontline staff to access key information on firm performance.
Among the recommendations set out in the report the NAO urges the FCA to ensure it has the operational processes to manage the scale of change it has in motion, and to work with HM Treasury and other stakeholders to review the effectiveness of new accountability arrangements.
The NAO also recommends that, by autumn 2024, the FCA should provide greater clarity about its performance to stakeholders, through the delivery of a core set of performance metrics.
Gareth Davies, head of the NAO , says the FCA should also build on current work in developing a long-term workforce plan to ensure it maintains the necessary expertise.
“The FCA is undergoing significant reform, responding to changes in the financial services regulatory framework and making operational changes intended to improve performance," he says. "“The FCA must complete its work on optimising its use of data, assessing whether it is achieving the outcomes it intends and whether it is able to direct resources to where they can have most impact. It must also be clear about which of the long list of activities it is monitoring internally are its priorities.”