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

A taskforce convened by the Royal United Services Institute (RUSI) has warned that the United Kingdom faces a critical challenge regarding crypto money laundering ahead of its upcoming evaluation by the Financial Action Task Force (FATF). With global assessors scheduled to arrive in 2027, the report highlights that the UK’s new regulatory framework will still be in a transition phase, potentially leaving the country vulnerable to scrutiny over its enforcement efficacy.

The UK faces a material risk from crypto money laundering as it prepares for a 2027 FATF evaluation.

Addressing crypto money laundering risks

The report, published on Friday, outlines the primary concerns expected to dominate the 2027 mutual evaluation, where the FATF will grade the UK on the practical application of its anti-money laundering standards. While the UK brought crypto firms under its regulatory perimeter in 2020 and passed further legislation in February, the mandatory regime is not set to take effect until October 25, 2027. The taskforce expressed doubt that the UK could demonstrate adequate implementation by the time assessors arrive in June of that year.

The taskforce, which includes experts from law enforcement, the private sector, and civil society, identified crypto as a "material risk" for the nation. According to the report, the City of London Police estimates that 66% of investment fraud in the UK now involves digital assets. Furthermore, the 2025 National Risk Assessment elevated the risk rating for crypto money laundering to high, a significant increase from its medium status in 2020.

Regulatory gaps and enforcement challenges

A central concern raised by the taskforce is that the UK’s current regulatory approach, which focuses on identifiable firms, may inadvertently push high-risk activities outside the reach of the Financial Conduct Authority. This could leave law enforcement to manage assets like Tether’s USDT, which a July 2025 Treasury report noted has been extensively utilized by illicit networks. While the taskforce praised the successful £5.5 billion crypto seizure linked to a professional money launderer in 2025, it cautioned that one high-profile case is insufficient evidence of systemic success. Members suggested that the UK has only begun to address the scale of the problem and raised concerns regarding the resourcing of the Financial Intelligence Unit and broader economic crime capacity.

Why it matters

The upcoming FATF evaluation is a pivotal moment for the UK, as it will be the first time the global body assesses the nation's specific crypto enforcement efforts. The findings will determine whether the UK is perceived as a robust jurisdiction in the fight against financial crime or if its regulatory lag creates loopholes for illicit actors.

For international observers, including those in India and South Asia, the UK's experience serves as a benchmark for how major financial hubs balance innovation with strict anti-money laundering compliance. As the FATF continues to pressure global jurisdictions to apply standards to decentralized platforms, the UK’s ability to prove its effectiveness will influence how other nations refine their own oversight of the digital asset sector.