TikTok has been accused of functioning as an unlicensed cryptocurrency exchange in the United Kingdom.
A letter sent to the Financial Conduct Authority (FCA) by a former compliance consultant for the cryptocurrency platform includes several concerns regarding the operation of the virtual currency segment. The letter also implies that TikTok allows users to convert its virtual currency to real money, which makes it fall under anti-money laundering laws.
According to the letter, TikTok’s rewards program helps in transferring funds to money service businesses. The TikTok Coins are bought by users and are used to send gifts to the creators of the content. These gifts are then exchanged for “diamonds” that can be exchanged for fiat currency. As per the compliance consultant, TikTok is essentially bartering crypto assets for cash without necessary FCA registration.
The letter further urges the FCA to regulate TikTok under anti-money laundering (AML) and terrorist financing laws. It reveals that the present structure of the platform is problematic, especially with regard to monetary transfers that can bypass rules and regulations. If the FCA steps in, it can result in scrutinizing TikTok’s financial transactions, particularly its virtual currency transactions.
Furthermore, the letter includes concerns about TikTok’s AML measures. It points out that in the absence of proper FCA registration, the platform may be exposed to money laundering and other frauds.
Global investigations target TikTok’s financial practices
The FCA oversees the financial companies in the UK to make sure they follow laws meant to prevent money laundering and terrorist financing activities. The absence of the FCA registration of TikTok has generated concerns regarding the firm’s capacity to manage transactions comprehensively. In response to these allegations, TikTok is also said to be increasing its compliance team to handle these issues.
The allegations are in line with earlier probes that have been directed at TikTok globally. In Australia, the Australian Transaction Report and Analysis Centre (AUSTRAC) is probing into the platform as it suspects the same to be involved in money laundering.
Moreover, TikTok has been banned and challenged legally in several countries, including the United States. These controversies have been occasioned by questions on user privacy and data protection. However, some politicians, such as the U.S. presidential candidate Robert F. Kennedy Jr., have come out in defence of TikTok against the bans.
In March, Italy fined three TikTok units for insufficient checks on content that might be dangerous for children or other vulnerable subjects. In related news, TikTok is said to be planning on cutting its workforce by hundreds of employees.
