The UK’s markets watchdog continues to crack down on money laundering, with crypto firms doing international transfers the latest to be put under the spotlight.
The so-called Travel Rule comes into force on 1 September, requiring crypto firms in the UK to collect, verify and share information about where funds come from and who the beneficiaries are.
In a 17 August update to firms, the Financial Conduct Authority said it expected firms to “take all reasonable steps and exercise all due diligence to comply”, even when third-party suppliers are involved.
The FCA also expects firms to regularly review which other jurisdictions are implementing the rule and adapt their businesses accordingly.
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When they receive crypto transfers from countries that don’t apply the Travel Rule, firms should conduct a “risk-based assessment” on whether the funds should be released, the regulator added.
The incoming rules mark the latest salvo in the UK watchdog’s bid to stop digital assets from being used to finance terrorism.
In an interview with Financial News in January, the watchdog’s digital assets boss Matthew Long said the regulator had significant concerns that criminal gangs were still taking advantage of the secrecy and anonymity offered by virtual currencies.
“If billions of pounds are being laundered through crypto — and let’s put that into context, that is drug money off the streets and gun money from the streets of the UK — if we’re seeing that going through and it is going around the world, that’s not a good thing for anybody,” he said.
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Currently, the FCA’s powers only extend to vetting crypto firms’ money laundering credentials. However, these checks have been stringent, resulting in the regulator granting permissions to some 15% who applied for them and a six-month gap where no crypto firms were authorised in the UK.
The UK regulator has not taken as hard a line as its US counterparts, however, which have taken direct legal action to shut some of the world’s largest exchanges, which authorities claim are running unregistered securities venues.
UK politicians have said they want to make the country a leading crypto hub, including Prime Minister Rishi Sunak, who fronted now-aborted plans to launch an NFT for Great Britain.
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