The FCA is to tighten its rules on crypto-asset transfers from 1 September to crack down on money laundering and financial crime.

The move follow changes to money laundering legislation added by the government in July 2022. 

From 1 September cryptoasset businesses in the UK will be required to “collect, verify and share information” about cryptoasset transfers - known as the ‘Travel Rule’. 

The aim is to align crypto asset disclosure more closely to other financial services areas, particularly in relation to money laundering rules.

The Travel Rule is designed to bring greater transparency to cryptoasset transfers, making it harder for criminals to use cryptoassets for illicit activity, the FCA said.

The Travel Rule advances anti-money laundering (AML) and counter-terrorist financing (CTF) efforts globally by helping cryptoasset businesses detect suspicious transactions and carry out effective sanctions screening. 

The FCA said: "Stronger standards like those bought in by the Travel rule and the financial promotions regime for cryptoassets in October 2023, help us better protect people, the integrity of our markets and support the sustained competitiveness of the cryptoasset sector in the UK." 

The Financial Action Task Force (FATF) has urged jurisdictions to swiftly implement the Travel Rule, which will bring together practices for cryptoasset businesses sending and receiving transactions with those common in other areas of financial services. 

The FCA says that its new expectations on firms include:

• Firms taking “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 complying 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 reviewing the implementation status of the Travel Rule in other jurisdictions and adapt business processes as appropriate

Firms must also take all reasonable steps to establish whether a firm can receive the required transfer 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 UK cryptoasset businesses must consider the countries in which the firm operates and the status of the Travel Rule in those countries. They must take these factors into account when making a risk-based assessment of whether to make the cryptoassets available to the beneficiary.

The FCA has been working with the Joint Money Laundering Steering Group (JMLSG) and the Treasury (HMT), on guidance to help firms comply with the Travel Rule.

Firms have until today (25 August 2023) to add the guidance to their procedures.

The timeline for implementation follows the Treasury publishing amendments to the MLRs in July 2022. Specifically, part 7A of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.