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UK Financial Regulator Prosecutes First Case of Unlawful Crypto ATM Operation

In a landmark legal action, the UK’s Financial Conduct Authority (FCA) has charged Olumide Osunkoya, a 45-year-old London resident, with operating unregistered cryptocurrency ATMs. This move marks the FCA’s first criminal prosecution under anti-money laundering (AML) regulations for such activity.

The Rise and Fall of Crypto ATMs in the UK

Crypto ATMs, machines that allow users to exchange cash for cryptocurrencies such as Bitcoin, have been viewed by regulators worldwide as a potential hotbed for illicit activity. Functioning similarly to traditional bank ATMs, these machines enable individuals to deposit physical cash and receive an equivalent amount of cryptocurrency into their digital wallets. While crypto ATMs may provide convenience for users looking to convert cash into digital assets without engaging with the conventional banking system, their very nature makes them attractive for money laundering, often with little or no traceability.

Despite their potential benefits for crypto adoption, these machines have faced growing regulatory resistance. In the UK, no legal crypto ATM operators currently exist, with all machines in operation being deemed illegal under current laws. The FCA has taken a hardline approach, stating that anyone using such machines is “handing your money directly to criminals.”

The charges against Osunkoya come after the FCA intensified efforts to clamp down on illegal crypto activities, particularly unregistered crypto ATMs. Between December 2021 and September 2023, Osunkoya’s machines processed over £2.6 million worth of cryptocurrency transactions across multiple locations, according to the FCA. This case highlights the scale of illegal crypto operations that can go unnoticed for extended periods before regulatory action is taken.

Legal Action Under Anti-Money Laundering Regulations

Osunkoya is charged with several offences under the Money Laundering, Terrorist Financing, and Transfer of Funds (Information on the Payer) Regulations 2017, known as the AML Regulations. These include operating unregistered crypto ATMs, as well as forging documents and possessing criminal property in connection with the suspected proceeds of his illicit activities. The FCA has confirmed that he will appear in court at Westminster Magistrates’ Court at the end of September 2024.

Notably, Osunkoya had been the director of Gidiplus Ltd, a company that specialised in crypto ATM services. The company’s registration application with the FCA was rejected in 2021, which should have legally prevented Gidiplus from offering any crypto services. Despite this, Osunkoya allegedly continued operating independently, leading to his current prosecution.

This case is the first of its kind in the UK, and the FCA has signalled it will not be the last. In the past two years, the regulator has rejected 87% of crypto companies’ applications for registration, citing inadequate money laundering protections as a primary reason. The regulator has also been actively inspecting sites believed to be operating unregistered crypto ATMs, conducting raids in cities such as Exeter, Nottingham, and Sheffield.

Crypto ATMs and Their Use in Money Laundering

Authorities have long viewed crypto ATMs with suspicion. Due to their lack of oversight and their ability to facilitate anonymous cash transactions, they are perceived as an ideal vehicle for money laundering. By converting untraceable cash into cryptocurrency, criminals can easily obscure the origin of funds and move money across borders with relative ease.

Operators of these machines typically earn fees on every transaction, and as crypto markets grew in popularity, so did the number of crypto ATMs worldwide. According to data from AltIndex, over 37,500 crypto ATMs were in operation globally by mid-2024. However, the UK has seen the opposite trend, with the number of machines drastically reduced from a peak of around 270 in 2020 to zero legally operating machines today.

The FCA’s strict stance on crypto ATMs is part of its broader strategy to tighten regulations around the crypto industry. In its annual report, published in September 2024, the FCA revealed it had issued 450 consumer alerts against misleading crypto asset promotions and tightened rules around advertising for crypto businesses. These actions underscore the FCA’s intention to protect consumers from high-risk, potentially fraudulent schemes while ensuring crypto companies comply with stringent anti-money laundering laws.

The Broader Implications of the Case

The prosecution of Osunkoya sends a clear message to the crypto industry in the UK: the FCA is willing to pursue criminal action to maintain regulatory control over a market that has grown significantly in recent years. While crypto assets themselves are not fully within the FCA’s regulatory scope, any business that facilitates the transfer of funds through crypto is required to comply with AML regulations, including registration with the FCA.

Critics, however, have questioned the FCA’s focus on crypto ATMs, with some legal experts suggesting that the machines serve a niche market and pose relatively low risk compared to the broader challenges of regulating the crypto sector. Nick Barnard, a partner at the law firm Corker Binning, described the prosecution as “a distraction from the real challenges faced by the FCA in regulating cryptoassets.” He argued that the value of crypto ATM transactions is small compared to the estimated hundreds of billions in crypto asset activity taking place in the UK.

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