Financial crime regulatory developments: January developments

Summary: The FCA is introducing a new regulatory regime for crypto assets in the UK. 
The Financial Services and Markets Act 2000 (Crypto assets) Regulations 2025 have been presented before Parliament, aiming to bring crypto assets under FCA regulation.
The new regime is expected to come into force on 25 October 2027. Firms must be authorised by the FCA at this point to operate in the UK.

Impact: Firms wishing to undertake new regulated crypto asset activities must apply for authorisation between 30 September 2026 and 28 February 2027.

Firms should submit their applications during the application period because the FCA intends to determine authorisations before the new regime goes live. If the authorisation process is not completed by that point, the firm will fall under a saving provision, which allows it to continue providing services until its application is finalised. If a firm does not apply during the application period, it will fall under a transitional provision when the regime starts, meaning it can continue its existing services but cannot take on new United Kingdom business, and if it does not apply at all, it must run off its business before the new regime begins.

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Summary: The NCA and NatWest Group have launched a joint campaign to help businesses protect themselves against invoice fraud. Invoice Fraud is one of the most common and costly types of fraud. It usually occurs when criminals deceive individuals and businesses into paying fake invoices or diverting genuine payments into accounts controlled by fraudsters.

Key statistics from Action Fraud (September 2025):

• Total losses: £3.9 million
• Average loss per case: over £47,000
• Invoice fraud made up 85% of all payment diversion fraud losses that month

Impact: The campaign provides simple but crucial prevention guidance:

• CHECK for unexpected or urgent changes in invoice or bank details
• VERIFY changes by phoning the supplier on a trusted number
• NEVER transfer money until certain the details are correct

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Summary: OFSI has published the outcome of its consultation on improving the civil enforcement processes for financial sanctions and the Oil Price Cap.

Impact: 

Proposed changes include:

• A new settlement scheme for monetary penalty cases.
• An Early Account Scheme allowing subject to provide a full factual account of events early in an investigation.
• Revised statutory maximum penalties.
• Updated public case assessment guidance.

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Summary: OFSI is strengthening its efforts to tackle the misuse of crypto assets for sanctions evasion and money laundering. It has recently partnered with Crytpo Cash Fusion Cell (an initiative involving the NCA, Metropolitan Police, HMRC, FCA and private sector organisations) to use real-time intelligence sharing to focus on high-risk individuals suspected of breaching financial sanctions using crypto assets.

Changes to OFSI’s statutory maximum penalties will be implemented via legislation when parliamentary time allows.

Impact: Regulated firms involved in digital assets should be mindful of OFSI's focus on crypto-related sanctions compliance, ensuring that its KYC controls and blockchain analytics capabilities allow it to meet its sanctions obligations.

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Summary: OFSI has fined Bank of Scotland PLC £160,000 for opening an account for a Designated Person which was later credited with £76,000. 
The customer's name had a changed character, an additional character in the forename, a missing middle name and a changed character in the surname.

This was not necessarily treated as a one-off, isolated incident. OFSI noted areas for enhancement across numerous control areas, including the inability of its screening system to reconcile common spelling variations of Russian names, out-dated training that did not reflect risks associated with the Russia sanctions post-2022 landscape, and escalation controls with no explicit instruction to escalate potential sanctions issues identified via PEP reviews.

Impact: This penalty highlights the importance of ongoing tuning and testing, as well as understanding the limitations of your screening systems to identify spelling variations.

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