The Financial Conduct Authority (FCA) is ramping up its crypto guidelines by announcing that from September cryptoasset businesses must comply with the ‘Travel Rule’.
The change to the money laundering legislation, which was amended to preside over cryptoasset companies, will now enforce that firms will be required to collect, verify and share information on crypto transfers.
The FCA has outlined that cryptoassets take their due diligence in complying with the guidelines, which places a responsibility on them to deal with third-party suppliers, as well as when sending or receiving a crypto transfer to a firm in the UK or any other jurisdiction.
When sending a crypto transfer and the firm cannot receive the necessary information, the business must collect and verify the information outlined in Money Laundering Regulations (MLRs) and store the data before making the transfer.
Furthermore, cryptoasset companies have been advised when transferring data to a jurisdiction where the Travel Rule is not applicable, the firm should do their due diligence if the jurisdiction abides by the new measure.
The Financial Action Task Force (FATF) has called on other jurisdictions to implement the Travel Rule to align with its overall goal of providing regulatory measures.
In June 2023, FATF highlighted the challenges arising from delays in adoption and different timelines for enforcement of the Travel Rule across jurisdictions. The FCA has stated it is working closely with the crypto industry to provide clarity over its new crypto measures.
In addition, the FCA has been working with the Joint Money Laundering Steering Group and HM Treasury, on guidance to help firms comply with the Travel Rule. Firms have until 25 August 2023 to have their input on the guidance.
The Travel Rule becomes one several crypto-related measures the FCA has introduced to safeguard the sector.
Last June, the financial regulator introduced a new crypto marketing rule highlighting investor tolerance with CryptoUK Director of Operations, Su Carpenter, warning the regulator that stringent measures may do more harm than good.
She said: “The requirement that all approvers of financial promotions have an understanding of crypto assets and have permission to act as an approver also has the potential to introduce an overly restrictive regime, based on the incredibly small number of organisations which would meet that criteria for approver status.”
