Travel rule
Automate data transfers with counterparties and ensure compliance with the latest regulatory requirements.
The rise of cryptocurrencies has brought an evolution in financial regulations to mitigate the risks associated with the sector. One such measure is the FATF's Travel Rule, initially aimed at traditional financial institutions but now extending to Virtual Asset Service Providers (VASPs).
The Travel Rule’s primary objective is to increase transparency in transactions, preventing misuse of digital assets for money laundering or terrorist financing. The key requirements of the Travel Rule include the exchange of sender and recipient information, such as personal identification and wallet addresses.
Who is affected by the Travel Rule?
The Travel Rule has broad-reaching implications for an extensive array of entities operating within the cryptocurrency ecosystem. However, VASPs are affected most directly.
According to the FATF, a VASP is a natural or legal person who, as a business, conducts the following activities:
- Exchange between virtual assets and fiat currencies.
- Exchange between one or more forms of virtual assets.
- Transfer of virtual assets.
- Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets.
- Participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.
VASPs are now required to implement Travel Rule measures in addition to traditional AML measures such as Know Your Customer (KYC) procedures, ongoing monitoring, sanctions screening, recordkeeping and other compliance measures.
Key requirements
The Travel Rule aims to add traceability to transactions, therefore preventing money laundering and terrorism financing.
The Travel Rule applies to any transfer of funds exceeding a specific value.
The FATF recommends that the Travel Rule be applied to any transaction over $1,000 involving another VASP, but some jurisdictions have different thresholds. According to the FATF, the Travel Rule flow for two VASPs can consist of the following steps.
Note
These are general requirements based on the FATF's recommendations and may vary depending on the specific regulations of each country.
Which countries enforce the Crypto Travel Rule?
Over 200 jurisdictions around the world have committed to FATF Recommendations through the global network of FSRBs (FATFStyle Regional Bodies) and FATF memberships. However, the implementation process can take years.
For example, in the UK, the Travel Rule comes into effect in September 2023. Still, many other countries—like the US, Canada, Germany, Switzerland, Japan, Singapore, and Hong Kong, etc.— have already implemented the Crypto Travel Rule. Meanwhile, the EU’s Regulation on information accompanying transfers of funds and certain crypto-assets is one notable example that will affect crypto transfers in Europe by the end of 2024.
| Country | Status | Date of implementation | Minimum threshold |
|---|---|---|---|
| Austria | Implemented | 23-Feb-2022 | EUR 1,000 When a transaction is below the threshold, a smaller set of data is required. |
| Bahamas | Implemented | 2020 | BSD $1,000 or more. |
| Bermuda | Implemented | 2018 | USD 1,000 |
| British Virgin Islands | Implemented | 1-Dec-2022 | No threshold. |
| Canada | Implemented | 1-Jun-2021 | CAD 1,000 or more. |
| Cayman Islands | Implemented | 1-Jul-2022 | No threshold. |
| Cyprus | Implemented | 2021 | Any transaction with a value equal to or in excess of EUR 1,000. |
| El Salvador | Implemented | 7-Sep-2021 | USD 1,000 |
| Estonia | Implemented | 15-Mar-2022 | No threshold. |
| Germany | Implemented | 1-Oct-2021 | EUR 1,000 When a transaction is below the threshold, a smaller set of data is required. |
| Gibraltar | Implemented | 22-Mar-2022 | EUR 1,000 |
| Hong Kong | Implemented | 1-Jun-2023 | HKD 8,000 When a transaction is below the threshold, a smaller set of data is required. |
| Indonesia | Implemented | Oct-2021 | Rupiah value that is equivalent to USD 1,000. When a transaction is below the threshold, a smaller set of data is required. |
| Israel | Implemented | 14-Nov-2021 | No threshold. |
| Japan | Implemented | 1-Apr-2022 | No threshold. |
| Liechtenstein | Implemented | 1-Jun-2021 | CHF 1 |
| Luxembourg | Implemented | 2020 | EUR 1,000 When a transaction is below the threshold, a smaller set of data is required. |
| Malaysia | Implemented | Apr-2021 | No threshold. |
| Mauritius | Implemented | 7-Feb-2022 | No threshold. |
| Nigeria | Implemented | 2022 | USD 1,000 When a transaction is below the threshold, a smaller set of data is required. |
| Philippines | Implemented | 2021 | P 50,000.00 or more, or its equivalent in foreign currency. |
| Portugal | Implemented | 15-Jul-2023 | No threshold. |
| Singapore | Implemented | 28-Feb-2020 | S $1,500 When a transaction is below the threshold, a smaller set of data is required. |
| South Korea | Implemented | 25-Mar-2022 | The travel rule applies when a VASP transfers virtual assets worth KRW 1 million or more to another VASP upon user’s request. |
| Switzerland | Implemented | 1-Jan-2020 | No threshold. |
| UAE | Implemented | Mar-2022 | AED 3,500 Due to the legal requirement, when a transaction is below the threshold, a smaller set of data is required. |
| USA | Implemented | 2013 | USD 3,000 or its equivalent in CVC (there was proposal to lower the threshold to $250 for funds entering or leaving the USA). |
| Venezuela | Implemented | 2021 | EUR 1,000 or its equivalent. |
| Zambia | Implemented | 2020 | (a) An amount equal to or above Kwacha Equivalent of USD 10,000.00 (whether denominated in Zambian Kwacha or a foreign currency in relation to a legal person or legal arrangement). (b) An amount equal to, or above the Kwacha equivalent of USD 5,000.00 (whether denominated in Zambian Kwacha or a foreign currency in relation to an individual). There is no reporting requirement for this threshold unless the financial institution fails to get any missing information from a reporting entity in which case a report must be made to the Centre. |
| Lithuania | Expected | 1-Jan-2025 | No information. It can be assumed, that if the corresponding regulation does not specify the threshold, the rule is applied to all transactions regardless of the amount. |
| United Kingdom | Implemented | 1-Sep-2023 | No threshold. However, a larger amount of data must be transferred for a transaction exceeding EUR 1,000 for international transfers. |
Sumsub’s Travel Rule solution
Sumsub’s Travel Rule check is part of our transaction monitoring solution. It lets crypto businesses that send or receive virtual asset (VA) transfers on behalf of a customer easily comply with the Financial Action Task Force (FATF) regulations Recommendation 16 requirements and ensure that transactions are fraud-free.
Sumsub’s Travel Rule lets you:
- Send, request, and receive data related to transaction counterparties.
- AML-screen both the originator and the beneficiary of the transaction.
- Cross-check the information on their accounts and submitted information.
- Generate reports for the regulators in a few clicks.
Benefits of Sumsub’s Travel Rule solution
The main benefits of using the solution are:
- Seamless integration with your system and other Sumsub products. You can use the Travel Rule check along with other user verification and transaction monitoring features, and AML checks to get the detailed information about each transaction.
- Most popular data exchange protocols under the hood. The system will automatically select the quickest and easiest way to obtain the counterparty data.
- Secure ecosystem. Access to the most recent verification data and other documentation related to other Travel Rule ecosystem members to ensure quick confirmation of all transactions.
Updated 5 days ago