UK Crypto Businesses Brace for FATF Travel Rule: Regulatory Net Tightens

• The UK’s Financial Conduct Authority has announced that all Virtual Asset Service Providers (VASPs) must comply with FATF’s Travel Rule from September 1.
• The Travel Rule requires VASPs to collect and disclose the sender and recipient details of cryptocurrency transfers during or before the transaction.
• If data is missing or incomplete, the FCA advises firms receiving crypto from a non-Travel Rule jurisdiction to consider not releasing funds to the recipient.

UK Crypto Businesses Brace for FATF Travel Rule

The UK’s Financial Conduct Authority (FCA) has issued a statement informing that all Virtual Asset Service Providers (VASPs) operating within its jurisdiction must comply with FATF’s Travel Rule from September 1. The rule requires VASPs to collect and disclose the sender and recipient details of cryptocurrency transfers either during or before the transaction in order to prevent money laundering and terrorist financing. Should data be missing or incomplete, firms receiving crypto from a non-Travel Rule jurisdiction are advised to consider not releasing funds to the recipient.

Regulatory Oversight Increases

Factors such as concerns over privacy invasion, tight controls designed to protect users and prevent fraud have caused contention within the crypto industry due to increasingly stringent regulatory climates. The FCA states it has “worked closely with industry” in order to develop appropriate guidance on compliance prior to this September deadline, while also expecting UK firms implementing these standards overseas even if that jurisdiction hasn’t adopted the Travel Rule yet.

FATF Overview

                                                                                                                           FATF is an intergovernmental body headquartered in Paris, France charged with combating global money laundering and terrorist financing through their 39 member countries‘ influence over non-members committing to financial crime standards.
                                    
                                                                              
 

Criticisms of Draft Guidance Document

 In 2021 Coin Center’s Director of Research Peter Van Valkenburgh criticized a draft guidance document from FATF calling their approach undemocratic and tantamount to warrantless surveillance.

Slow Implementation of Travel Rule

                                          FATF reported concerns regarding slow implementation of its Travel Rule amongst jurisdictions earlier this year in June; raising questions about intrusive nature of said regulation while emphasizing responsibility for VASPs achieving compliance – even when involving third-party suppliers – as well as for UK businesses maintaining these same standards abroad regardless of a given jurisdiction’s adherence rate.