FCA sets out expectations for travel rule compliance

FCA has set out its expectations for UK cryptoasset businesses subject to the so-called ‘travel rule’, which will require them to collect, verify and share information about cryptoasset transfers from 1 September 2023.

Firms will be expected to:

  • Take all reasonable steps and exercise all due diligence to comply with the travel rule;
  • 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 or from a firm that is in the UK, or any jurisdiction that has implemented it; and
  • 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 that has not implemented the travel rule, FCA expects firms to take all reasonable steps to establish whether the firm can receive the required information. If it cannot, the UK cryptoasset business must still collect and verify the information as required by the MLRs, and store it before making the transfer.

When receiving a cryptoasset transfer from a jurisdiction that has not implemented the travel rule, if the transfer has missing or incomplete information, FCA expects UK cryptoasset businesses to consider countries in which the firm operates and the status of the travel rule in those countries. The businesses should take these factors into account when making a risk-based assessment of whether to make the cryptoassets available to the beneficiary.

FCA, Treasury and JMLSG have been working on guidance to help firms comply with the travel rule. FCA has reminded firms that they have until 25 August to input to the guidance.

Separately, FATF is urging other jurisdictions to implement the travel rule as quickly as possible, so practices for crypto businesses sending and receiving transactions can be aligned.

Laura Wiles