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Travel Rule Deadline Approaches: What UK VASPs Need to Know

Catarina Veloso
Catarina Veloso
August 22, 2023
Catarina, Regulatory & Compliance Senior Associate at Notabene, specializes in global crypto regulations. With roles including co-chair of the CryptoUK Travel Rule group and part of the EBA Expert Group, she shapes Travel Rule compliance. Holds Masters in Energy Law and BA in Law.
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Summary

As the Travel Rule deadline approaches, UK has made significant strides that directly impact UK VASPs’ compliance programs. In this article will highlight the key milestones and takeaways from recent regulatory publications and how Notabene is responding to these developments. Stay informed and engaged with the most relevant regulatory developments concerning Travel Rule compliance in the UK with Notabene.

Relevant Travel Rule regulatory milestones in the UK 

The timeline below gives a brief overview of the most relevant milestones for Travel Rule compliance in the UK:

Key Travel Rule Takeaways from the JMLSG Guidance

On July 28, 2023, the Joint Money Laundering Steering Group (JMLSG) published a draft Travel Rule guidance that is now up for public consultation. CryptoUK’s Travel Rule Working Group, co-chaired by Notabene’s Senior Regulatory and Compliance Associate Catarina Veloso, shared insights and feedback with regulators and the JMLSG ahead of the publication of this draft. Both Notabene and CryptoUK will submit a response to the public consultation, by August 25, 2023. 


Find the key takeaways below: 

  1. Sunrise Issue: The current draft of the JMLSG Guidance acknowledges the Sunrise period as presenting “challenges for CBs dealing with counterparties in jurisdictions where the travel rule has not yet been implemented”. The current draft guidance advises Crypto Businesses (CBs) to take account of any FCA communications on this matter. Learn the FCA’s specific expectations for UK VASPs transacting during the sunrise period below. 
  2. Cross-border Transactions: The Guidance clarifies that UK VASPs must follow UK Travel Rule requirements, regardless of whether their counterparty is subject to a different scope of requirements.
  3. Self-hosted Wallet Transactions: The guidance offers VASPs detailed advice on risk assessment and appropriate actions for self-hosted wallet transactions.
  4. Counterparty Discoverability: With no global VASP identifiers, the guidance suggests steps VASPs can take to identify counterparties and ascertain wallet hosting status.
  5. Lightning Network: The draft discusses Travel Rule application within the Lightning Network, stating intermediate parts of a transfer are not subject to the rule, even if nodes are CBs.

Dive deeper into the takeaways on our recent blog post.

FCA Statement: How UK VASPs should proceed with transactions during the sunrise period

On August 17, 2023, the FCA published its expectations for UK cryptoasset businesses complying with the Travel rule. The publication outlined how UK VASPs are required to comply with the Travel Rule when sending or receiving a transaction from a counterparty based in a jurisdiction where Travel Rule does not yet apply.

  • When sending a transaction to a jurisdiction without the Travel Rule, if the counterparty VASP cannot receive the necessary information, the Originator UK VASP 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.

📌 Notabene clients can monitor the transfers sent to VASPs that are not able to receive Travel Rule information within their compliance dashboard.

  • When receiving a transaction without the required Travel Rule information, UK Beneficiary VASPs must make a risk-based assessment of whether to make the cryptoassets available to the beneficiary customer taking into account the status of Travel Rule regulations in the jurisdiction where the counterparty operates.

📌 Notabene clients are able to detect and monitor incoming transactions with missing Travel Rule information via API. These transactions will appear in their compliance dashboard.

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