UK Joint Money Laundering Steering Group Publishes Guidance on Travel Rule for Cryptoasset Exchange Providers and Custodian Wallet Providers

The Joint Money Laundering Steering Group has published revisions to its Sector 22 Guidance on Cryptoasset exchange providers and custodian wallet providers along with a new Annex I, setting out guidance on the U.K. Travel Rule for cryptoassets. The Travel Rule was introduced under the Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022, amending the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and requires certain identification information on the sender and recipient to accompany a transfer of a cryptoasset. The Travel Rule requirements have applied since September 1, 2023.

The JMLSG consulted on the proposed guidance between July-August 2023. The final Guidance is being implemented largely as consulted on, with an additional requirement that data protection obligations should be taken into consideration by cryptoasset businesses.

Separately, the U.K. Financial Conduct Authority has published a statement setting out its expectations on how U.K. cryptoasset businesses should comply with the Travel Rule. Firms are expected to take all reasonable steps and exercise all due diligence to comply with the Travel Rule and will remain responsible for compliance, even when using third-party suppliers. They should comply any time cryptoasset transfers are made to or from a firm in any jurisdiction that has implemented the Travel Rule. There is also guidance on best practice when sending or receiving a cryptoasset transfer to or from a jurisdiction that has not implemented the Travel Rule.

Cryptoasset businesses offering certain services (e.g, exchanges, custodians and ATMs) are required to register with the FCA for anti-money laundering purposes. The marketing of certain cryptoasset activities will also be brought within the scope of the U.K. financial promotions regime from October 8, 2023 (as discussed in our separate blog). Under the new regime, cryptoasset firms that are registered with the FCA for AML purposes will be permitted to communicate their own financial promotions on a temporary basis, while the U.K. Government determines its broader approach to the regulation of cryptoassets. The U.K. Government is reviewing responses to its consultation on the future U.K. regulatory regime for cryptoassets in tandem (discussed in our client note, UK Proposals for Cryptoasset Regulation).

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