Travel Rule Enforcement Begins for Crypto Firms in the UK – Here’s What You Need to Know

Virtual Asset Service Providers (VASPs) in the UK are from September 1 required to collect, verify and share information on crypto transactions to firms “in the UK, or any jurisdiction that has implemented the Travel Rule.”

In a statement from the UK’s Financial Conduct Authority (FCA), the regulator said that firms are now expected to “take all reasonable steps” to comply with the Travel Rule, and that companies themselves are solely responsible for compliance, even in cases where third-party suppliers are used.

The regulator added that it has worked closely with the UK’s crypto industry to develop the guidelines, which outlines “what we reasonably expect of firms ahead of other countries following the UK’s position.”

The Travel Rule is designed to bring greater transparency to cryptoasset transfers, making it harder for criminals to use #crypto for illegal activity.https://t.co/kmB6rgMn5e

— Financial Conduct Authority (@TheFCA) August 17, 2023

According to the FCA, the goal of the Travel Rule is to advance anti-money laundering (AML) and counter-terrorist financing (CTF) efforts by helping companies in the crypto industry detect suspicious transactions and screen transactions for possible sanction violations.

Specifically, VASPs will need to collect and verify information that could be relevant for these efforts when making transactions to other countries that comply with the Travel Rule.

For transactions to and from non-Travel Rule countries and jurisdictions, crypto firms must make a “risk-based assessment of whether to make the cryptoassets available to the beneficiary,” the FCA said.

Mexico ‘leading the way’ in Latin America

The Travel Rule was developed by the Financial Action Task Force (FATF), a global anti-money laundering watchdog.

Already, a number of countries have implemented the rule, with Mexico said to be “leading the way” in Latin America, while Argentina is “lagging behind,” according to the Latin American Financial Action Task Force (known locally as GAFILAT).

The organization has also said that Brazil, Chile, and Bitcoin-keen El Salvador are making good progress, while Cuba, Nicaragua, and Paraguay are making more modest progress.