September 5, 2023
By Anjali Kochhar
The United Kingdom is implementing new rules to enhance the reporting of cryptocurrency transactions. These rules, part of the International Financial Action Task Force (FATF) Recommendation 16, are designed to combat money laundering in the crypto space.
Here’s what you need to know：
Under the FATF’s Recommendation 16, both virtual asset service providers and financial institutions operating in the UK will have a crucial role. They are now required to collect and share personal data of individuals involved in specific crypto transfers.
So, what kind of transactions are we talking about? The reporting requirements kick in for crypto transfers exceeding 1,000 pounds and involve UK-based individuals. Institutions will need to gather several pieces of information, including the sender’s name, address, account number, transaction identifier, personal document number, and customer identification number or data related to their place and date of birth. Additionally, they must report the recipient’s name and account number.
The FATF, an international regulatory body, has emphasised the importance of consistent global implementation and enforcement of these rules. However, the progress in this area has been slow, with different countries setting varying thresholds and requirements. For example, in the US, transactions over $3,000 are subject to reporting, while in Canada, institutions must also record beneficiary names and addresses.
In the UK, lawyers from the international law firm Clifford Chance have pointed out significant challenges in meeting these reporting requirements. Cryptoasset Service Providers often cannot determine whether the counterparty in a crypto transfer is an individual or another service provider based solely on wallet addresses. Furthermore, identifying the location of the sender’s wallet is often impossible. This becomes even more complicated when the transaction’s originator (typically the crypto service provider’s client) lacks this information.
It’s worth noting that the new rules do not cover un-hosted wallets. This means that transactions to un-hosted wallets will be exempt from reporting requirements, even though they carry a higher risk of being used for money laundering.
In summary, the UK is taking steps to strengthen its crypto transaction reporting rules in an effort to combat money laundering. These rules align with international standards set by the FATF. While the goal is clear, the practical implementation of these rules presents significant challenges, and discrepancies among different countries’ regulations complicate matters further. The crypto industry will need to adapt to these changes, with a focus on enhancing transparency and security in cryptocurrency transactions.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.