FCA sets out Travel Rule expectations ahead of coming into effect in the UK

Rick Steves

The Travel Rule, which is being pushed by the Financial Action Task Force (FATF), will come into effect in the United Kingdom on 1 September 2023. 

From that day onwards, cryptoasset businesses in the UK will be required to collect, verify and share information about cryptoasset transfers.

The Financial Conduct Authority, the UK’s financial watchdog, is setting out its expectations for cryptoasset businesses that need to comply with a change in money laundering legislation legislated by the government in July 2022.

What cryptoasset firms should do to comply ith Travel Rule

The Travel Rule advances anti-money laundering (AML) and counter-terrorist financing (CTF) efforts globally by helping cryptoasset businesses detect suspicious transactions and carry out effective sanctions screening.

Aware of the challenges arising from delays in adoption and different timelines for enforcement of the Travel Rule across jurisdictions, the FCA has worked closely with industry to provide guidance on how to comply and what the regulator reasonably expects of firms ahead of other countries following the UK’s position. Expectations for firms include:

  • Take all reasonable steps and exercise all due diligence to comply with the Travel Rule.
  • Firms remain responsible for achieving compliance with the Travel Rule, even when using third-party suppliers.
  • Fully comply with the Travel Rule when sending or receiving a cryptoasset transfer to a firm that is in the UK, or any jurisdiction that has implemented the Travel Rule.
  • Regularly review the implementation status of the Travel Rule in other jurisdictions and adapt business processes as appropriate.

When sending a cryptoasset transfer to a jurisdiction without the Travel Rule:

  • Take all reasonable steps to establish whether the firm can receive the required information.
  • If the firm cannot receive the necessary information, the UK cryptoasset business must still collect and verify the information as required by the Money Laundering Regulations (MLRs) and should store that information before making the cryptoasset transfer.

When receiving a cryptoasset transfer from a jurisdiction without the Travel Rule:

  • If the cryptoasset transfer has missing or incomplete information, UK cryptoasset businesses must consider the countries in which the firm operates and the status of the Travel Rule in those countries.
  • The UK cryptoasset business should take these factors into account when making a risk-based assessment of whether to make the cryptoassets available to the beneficiary.

Sumsub, Notabene, and VerifyVASP, among solutions providers to address Travel Rule

Ahead of the Travel Rule, UK-based crypto business Wirex has recently partnered with Sumsub in order to comply with the new FATF rules, as well as for transaction monitoring and KYC.

In April of this year, Notabene warned that 37.5% of crypto firms were performing post-transaction against FATF requirements. In the meantime, Fireblocks integrated Notabene to launch a compliance solutions suite. In 2022, Notabene beefed up its FATF Travel Rule compliance solution with Refinitiv’s World-Check.

For Bybit, compliance with the Travel Rule included joining VerifyVASP, a closed, centralized Travel Rule messaging protocol for secure and immediate data sharing between verified VASPs. Earlier this year, VerifyVASP became the first GLEIF Validation Agent to operate exclusively in the crypto space.

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