The UK legal authorities have recently turned their sights on TikTok as it is being accused of running an unlicensed crypto exchange through its virtual currency system. A former compliance consultant recently accused TikTok of having a virtual currency system. The claims were filed to the Financial Conduct Authority (FCA) with the US attorney’s office. This has caused many concerns in the UK about the financial regulation of the popular application TikTok.
Concerns Over TikTok Coins
The main concern is based on TikTok Coins, which is virtual currency used in the application. Subscribers can buy these coins by sending virtual gifts to the content developers, and the developers, in turn, exchange the gifts for diamonds. These diamonds can then be exchanged for real money and such accusations have been made that TikTok is engaging in money transmission without being properly licensed by the FCA.
The former compliance consultant, who spoke to the Financial Times, explained that this system could let TikTok function like a crypto exchange. The structure may enable the user to swap virtual currency for fiat, but this will not be controlled properly.
AML Controls Questioned
The letter reveals that the system used by TikTok might have insufficient measures to mitigate risks against money laundering. This has brought the issue that the platform is prone to financial fraud and money laundering if not regulated to the limelight.
The consultant has recommended that the FCA bring TikTok under the ambit of the UK’s Anti Money Laundering and Counter Terrorist Financing Act. Even though TikTok Coins are not considered cryptocurrency, they raise legal concerns due to their use in trading virtual merchandise for real money.
Global Legal Challenges
TikTok has been accused of the same in other countries, including Australia, where the application is under investigation over possible money laundering risks. The Australian government is investigating receipts that state that TikTok has been involved in transferring money related to crimes.
Australia to Introduce New Crypto Licensing RegulationsDespite these ongoing legal challenges, TikTok has repeatedly denied any involvement in such activities. The company has also indicated that it does obey the laws of the country where it operates. It has also put in place sound measures to ensure that its financial features are not misused in any way.
At the moment, TikTok has not addressed the new claims in the UK. If the FCA decides to act, the platform may face more rigorous rules. It could also undergo stricter scrutiny of its financial activities.
