FCA sets out expectations for UK cryptoasset firms to comply with the new Travel Rule
What has happened?
What is the Travel Rule?
Following the Financial Action Task Force (FATF) Recommendation 16, the UK’s Anti-Money Laundering and Terrorist Financing regulations were updated to include what has now become known as the ‘Travel Rule’. The Travel Rule is an attempt to create a more transparent audit trail with specific information on the blockchain - information on both the remitter and beneficiary will need to be recorded. It is designed to make it harder for criminals to use cryptoassets for illicit activity, by bringing more transparency to cryptoasset transfers.
In June, FATF highlighted the ‘sunrise issue’ – a delay in the timelines of adoption across different jurisdictions, which would present challenges for cryptoasset businesses dealing with firms in jurisdictions that have not yet implemented the Travel Rule. The FCA’s expectations released on 17th August provide firms with guidance on how to comply and what it expects from 1st September.
What are the FCA's expectations?
As per its statement , the FCA expects firms 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 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.
- 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.
How can we help you?
Thistle Initiatives has supported firms for over 10 years as a trusted compliance and regulatory advisor. In addition to assisting you as-and-when, its team of specialists can serve as your right hand in meeting and complying with regulations. We understand the importance of staying up-to-date and compliant and are dedicated to providing the guidance and support needed to do so.
From the 1st September, cryptoasset businesses based in the UK will be required to collect, verify and share information about cryptoasset transfers. If the information is not being recorded correctly after this time, your firm will be at risk of receiving fines from the FCA.
Thistle Initiatives has a proven track record with cryptoasset businesses and can provide specialist advice to your firm to help you implement processes to ensure you remain compliant with the new legislation. Contact our specialist team now to schedule a free consultation. Get in touch with us by calling 0207 436 0630 or send an email to email@example.com.