FCA Consults on Updated Financial Crime Guidance for Crypto Businesses

The Financial Conduct Authority (FCA) of the UK has initiated a consultation on its updated financial crime guidance for crypto businesses, which includes customer checks, blockchain analytics, and adherence to the Travel Rule. The consultation, which is open until December 24, aims to provide clarity on the controls expected from crypto firms as part of the UK's expanding regulatory framework.

Published on October 23, the FCA's proposals aim to enhance the understanding of financial crime risks associated with cryptoassets, fraud, sanctions, data security, and money laundering. The guidance is directed at the FCA’s supervisory population, which includes cryptoasset businesses and firms governed by the Money Laundering Regulations.

The consultation emphasizes the importance of effective customer and transaction assessment, particularly in response to changing risk levels. While blockchain records can aid investigations, the FCA notes that they do not solely determine the credibility of customer explanations or the necessity for further scrutiny of transactions.

Among the proposed changes, the FCA provides examples of both good and poor practices for enhanced due diligence, onboarding, and transaction monitoring. It particularly highlights the role of blockchain analytics and offers further guidance on the Travel Rule, which mandates information accompanying specific transfers.

The FCA also stresses that as businesses grow, their governance must adapt accordingly. The guidance includes inquiries about whether firms differentiate between obligations under proceeds-of-crime legislation and those under terrorism legislation. This implies that simply acquiring a screening product is insufficient; firms must actively manage thresholds, review alerts, and document decisions effectively.

Notably, the FCA clarifies that the consultation document does not introduce new rules or requirements but is intended to help firms comprehend supervisory expectations and evaluate their own practices. The final text will be published in a policy statement following the consultation period.

In addition, the FCA's broader cryptoasset framework is set to take effect on October 25, 2027, with applications for authorization already open. This consultation does not delay existing anti-money-laundering obligations, nor does it implement the future regime immediately. Instead, it provides guidance for firms to translate their responsibilities into practical actions.