What the “Failure to prevent fraud” law means for UK businesses
A new era of accountability On 1 September 2025, the UK introduced a major shift in corporate liability with the …
Insight
On October 15, Morgan Stanley will officially allow all its wealth management clients to invest in cryptocurrency funds—removing previous restrictions that limited access to high-net-worth individuals with aggressive risk profiles. This move marks a significant milestone in the mainstreaming of digital assets.
While this democratisation of crypto access may excite investors, it raises critical questions for compliance professionals—especially those focused on Anti-Money Laundering (AML) protocols.
The AML challenge
Morgan Stanley’s move to offer crypto investments to all wealth clients—including those with retirement accounts—marks a bold step into the digital asset space. However, this expansion comes at a time when the firm is under heightened regulatory scrutiny. Over the past five years, Morgan Stanley has faced multiple investigations and fines for AML-related failures, including a $1.1 million penalty in 2025 tied to compliance lapses in Switzerland. Regulators have flagged critical weaknesses in client risk scoring, onboarding procedures, and the oversight of politically exposed persons (PEPs).
Opening crypto access to a broader client base could significantly amplify these risks. Cryptocurrencies, with their pseudonymous nature and decentralised structure, are notoriously difficult to trace—making them attractive tools for illicit finance. Without rigorous controls, financial institutions risk becoming unwitting conduits for money laundering. This underscores the urgent need for enhanced AML frameworks, including real-time identity verification, transaction monitoring, and robust client profiling. For firms navigating this space, solutions like Veriphy’s AML and KYC tools are essential to maintaining compliance and safeguarding reputation in an increasingly complex financial landscape.
Compliance implications and what needs to change
To mitigate these risks, firms like Morgan Stanley must:
- Enhanced Client Due Diligence (CDD): With crypto now accessible to a wider audience—including high-net-worth individuals, retirees, and international clients—AML teams must refine their onboarding processes. This includes deeper identity verification, risk scoring, and behavioral profiling to detect potential red flags early.
- Strengthened transaction monitoring: Traditional monitoring systems may fall short when applied to decentralised platforms and peer-to-peer crypto transactions. Institutions must invest in automated tools capable of detecting suspicious patterns, layering, and rapid asset movement across wallets and exchanges.
- Improved PEP vetting: As politically exposed persons (PEPs) enter the crypto space, institutions must ensure their screening processes are airtight. This includes ongoing monitoring, enhanced due diligence, and cross-border compliance checks to prevent misuse of digital assets for illicit purposes.
- Alignment with FATF guidance: The Financial Action Task Force (FATF) continues to emphasise transparency in beneficial ownership and a risk-based approach to virtual assets. Institutions must align their policies with FATF’s evolving recommendations, including the Travel Rule, which mandates the sharing of sender and receiver information in crypto transactions.
Looking ahead
This pivot is part of a larger trend: the integration of crypto into traditional finance. As more institutions follow suit, AML frameworks must evolve. This includes leveraging AI-driven compliance tools, cross-border data sharing, and real-time risk scoring.
In this world of digital finance, compliance is no longer a back-office function—it’s a strategic imperative. Firms that proactively adapt will not only meet regulatory expectations but also build trust with clients and regulators alike.
Need support strengthening your AML compliance processes? Our experts are on hand to help—just get in touch or request a demo to learn more about our solutions! You can also sign up for one of our training courses to develop your team’s knowledge and understanding of compliance.
