UK’s FCA Sets Out Expectations for UK Cryptoasset Businesses Complying With the Travel Rule

The United Kingdom’s (UK) Financial Conduct Authority (FCA) on 17 August 2023 published a statement setting out expectations for UK cryptoasset businesses (CBs) or Virtual Asset Service Providers (VASPs) complying with the Travel Rule. Having worked closely with industry, the FCA is providing guidance for CBs to meet the UK’s Travel Rule regulations by the 1 September 2023 deadline, amid global challenges as emphasised by the FATF in the June 2023 Targeted Update on Implementation of the FATF Standards on Virtual Assets and VASPs.

In essence, the FCA is adopting an inclusive and risk-based strategy, recognising that many countries have yet to enforce Travel Rule. This approach provides flexibility in FCA’s expectations for CBs which may face challenges in full compliance with Travel Rule.

The FCA’s guidance and expectations are expected to be reviewed regularly and adjusted in accordance with international developments..

Below is an extract of the FCA statement:

Our expectations for CBs 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.

Get in touch with us (corporate@verifyvasp.com) to discover how we can assist in your Travel Rule compliance efforts.