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What Is the UK Travel Rule for Crypto?

11 Oct, 2023

On 1 September, the UK Travel Rule went live. Cryptoasset businesses (CBs) must register with the Financial Conduct Authority (FCA) and comply.   

What Is the UK Travel Rule for Crypto?

The UK Travel Rule implements the Financial Action Task Force’s (FATF’s) Recommendation 16, which broadens the existing requirements for traceability in wire transfers to encompass virtual asset transfers.

The Travel Rule will apply to cryptoasset businesses in the UK and those wishing to conduct business with UK CBs. It also applies to unhosted wallet (self-hosted wallet) transfers to or from a CB.

Read The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022

To Whom Does the UK Travel Rule Apply?

The UK’s implementation of the Travel Rule applies to all CBs based and operating in the UK as well as foreign CBs (or VASPS) conducting business within the UK or transacting with the UK CBs. Moreover, it applies to every cryptoasset transaction irrespective of the value. 

Notably, a CB can be a cryptoasset exchange provider (CEP) or a custodial wallet provider (CWP). According to Article 14:  A cryptoasset exchange provider: 

  • exchanges, makes arrangements with a view to the exchange of, cryptoassets for fiat, crypto for crypto, or

  • if it operates a crypto ATM.

Whereas a custodial wallet provider: 

  • safeguards, or

  • safeguards and administers, on behalf of its customers, cryptoassets, or private keys in order to hold, store and transfer crypto.

CB to CB Transfers Require Travel Rule Compliance

When a crypto transfer occurs between a CBs, the originator CB must verify the information relating to the originator customer based on documentation or other reliable, independent sources.

Beneficiary and intermediary CBs must ensure all required information has been received before releasing the assets to its customers. Moreover, the data must follow its customer due diligence (CDD) verified information.  The information required depends on where the counterparty is located, whether locally in the United Kingdom or elsewhere, and on the value of the transaction. See more details below.

CBs to or from Unhosted Wallet Transfers Require Other Measures

Transfers involving a CB and unhosted wallets fall under the UK’s Travel Rule. The CB is to apply a risk-based approach and assess the risks the wallet address could pose according to Money Laundering, Terrorist Financing and Proliferate Financing standards before requesting the Travel Rule data. 

With transactions - or collective transactions - over EUR 1000, additional originator Travel Rule data may be requested, which can include: 

  • customer identification number (or principal place of business), or 

  • address, or 

  • birth certificate number, or 

  • passport number, or 

  • national identity card number, or 

  • date and place of birth

Download the UK Travel Rule Overview

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Travel Rule Data Timing 

Like the FATF’s Recommendation 16, the UK’s Travel Rule stipulates that customer data be sent before the transaction can occur, regardless of whether the CB is the originator or beneficiary. Furthermore, the law explicitly states that the beneficiary cannot release the funds unless the required information has been received and the received data corresponds with its CDD-verified information. 

If data is missing or has not been sent, it must be requested from the originator. Based on risk assessments, it is up to the beneficiary CB to return the funds to the originator or delay fund accessibility to its customer. 

Read UK Travel Rule Hard-To-Comply Points & How To Overcome Them for an in-depth look at the quarantining and returning of crypto funds as per the FCA. 

Domestic Transfers 

Per the MLR, CBs based in the UK only need to provide the basic information requirements, which includes: 

  • Originator’s name (or firm’s registered name)

  • Originator’s account number or unique transaction ID

  • Beneficiary’s name (or firm’s registered name)

  • Beneficiary’s account number or unique transaction ID

Read more about the UK Travel Rule here 

What Is the Threshold for Crypto Travel Rule in the UK?

The UK threshold is EUR 0.  Although less data is required in certain instances - explained below - Travel Rule data must be exchanged in all cryptoasset transactions, irrespective of value.

Additional information is required for transfers over EUR 1000 or collective transfers totalling over EUR 1000 between a foreign VASP and a UK-based CB. 

UK Travel Rule requirements
UK Travel Rule Requirements

* When the originator or the beneficiary is a firm. Account numbers must be and remain unique to a customer.

Creating a Safer and Clearer Regulatory Environment

By implementing this regulation, the UK seeks to reduce instances of financial misconduct and the improper use of cryptocurrency assets, creating a more secure environment that provides clear regulatory guidance for all stakeholders, ultimately leveraging itself as a crypto hub. 

Find out how 21 Travel Rule can help your cryptoasset business meet the demands of the UK Travel Rule.

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