The proposed guidance is nonbinding. The FCA says the Guide contains no rules and imposes no new requirements, although it expects firms to read and consider it when establishing effective controls. Departing from the guidance would not, by itself, establish a breach of FCA rules.
Risk scores and tracing rules
The monitoring proposals also address how firms reach those decisions. Draft FCG 3.2.5 identifies as poor practice using third-party technology without being able to explain or evidence the basis of its findings or scoring.
It also criticizes rigid rules about how many transaction “hops,” or transfer steps, a firm examines when those rules fail to account for risk-appropriate measures. The issue is a tracing rule that disregards risk, rather than the mere use of a numerical limit.
Existing duties already provide the backdrop. Under the UK Travel Rule, cryptoasset businesses have been required to collect, verify and share transfer information since Sept. 1, 2023. The FCA also says firms remain responsible for compliance when they use third-party suppliers.
The regulator does not expect the proposed Guide updates to materially increase compliance activity or consumer costs, or materially change firms’ products and services. It describes the changes as clarifying existing expectations and established practice.
The consultation covers firms supervised by the FCA for financial crime, including cryptoasset businesses under the Money Laundering Regulations. The FCA plans to consider responses and publish feedback and the final Guide text in a Policy Statement; it has not specified a publication date in the consultation.