FCA Proposes Crypto Crime Guidance on Wallet Checks and Blockchain Analytics

Guidance Clarifies Existing Rules

The consultation, launched on October 23, seeks to modify the Financial Crime Guidance. It integrates crypto assets with fraud, sanctions, data security, and money laundering. These proposals apply to all FCA-supervised entities. This includes crypto firms and those under AML monitoring.

Practical Application of Controls

The focus is on transaction and client evaluation methods. Firms must react to risk changes. Blockchain records aid investigations. However, they do not validate client explanations alone. Analysis needs integration into a functional control system. It cannot be an automated fix.

Best Practices and Travel Rule

The document shows good and poor practices. It emphasizes enhanced due diligence and onboarding. Blockchain analysis tools receive special attention. Further guidance is given on the Travel Rule. This rule requires specific data with certain transfers. Governance structures must grow with business expansion. The proposal also questions if internal policies clearly separate crime and terrorism financing obligations.

Beyond Screening Tools

For currency exchange or custody providers, screening software is only one part. Someone must set alert thresholds. They must review alerts and document decisions. A technical alert is useless if unresolved while funds move. This applies to stablecoins and volatile tokens equally. Stablecoin price stability does not identify the sender or origin. Transaction and market risks are distinct. Control systems must reflect this difference.

Regulatory Scope and Timeline

The FCA stresses the guide is not new regulation. It offers clarity on supervisory expectations. After the December 24 consultation closes, the regulator will issue feedback and a final policy statement. The broad crypto framework is set for October 25, 2027. Authorization requests are open, and final rules were published in June. This consultation does not delay existing AML duties. It helps translate obligations into daily decisions.