What Is The Travel Rule, Which Countries Require It, And Why Should You Implement It Now?

The “travel rule”, issued in 2019 by the Financial Action Task Force (FATF), is controversial but critical guidance to prevent digital money laundering. It will affect nearly all crypto users; but crypto businesses like exchanges, neobanks, and payment companies will need to pay particularly close attention so that they can implement incoming regulations and not be left behind.

The technical challenges of implementing the travel rule are yet to be overcome – but Ospree has built a solution. Providing a multi-functional software for all virtual asset service providers (VASPs), Ospree Flow was designed to collect and connect the necessary data needed to complete this exchange of information. Flow merges the travel rule, blockchain analytics, ESG, and KYC into one intuitive software. Join our whitelist to access Ospree Flow on our commercial release.

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Crypto Travel Rule Explained

The Financial Action Task Force (FATF) is an intergovernmental organization founded on the initiative of the G7 to develop policies for combating money laundering in thirty-seven countries. In 2019, the FATF suggested a coordinated approach to tackle money laundering and terrorist financing, specifically highlighting the crypto space: the travel rule.

This suggestion, formally known as Recommendation #16, requires VASPs to share information regarding the originators and beneficiaries of crypto transactions that exceed $1,000, according to FATF. (Transaction thresholds can vary by jurisdiction)

Whenever more than $1,000 is moved between VASPs, the crypto service provider of the sender is expected to relay the personally identifiable information (PII) to the crypto service provider of the recipient, and vice versa. However, member states can opt to implement versions of this rule that match their own guidance and local regulations.

Until now, no universally accepted method exists for this information to be easily and seamlessly shared.

Read more about the Travel Rule in detail HERE‍

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Different Variations of the Crypto Travel Rule by Country

In the U.S.A, the crypto travel rule kicks in at $3,000, meaning the PII only needs to be shared if the amount transacted is above $3,000. When this happens, VASPs are required by the regulating body FinCEN to share the amount transacted, the date of the transaction, and the identity of the crypto service provider.

Switzerland has a noticeably stricter version of the travel rule. Here, crypto service providers must provide FINMA, the Swiss financial regulators, with the identification of private wallets that interact with local VASPs. VASPs in Switzerland should not facilitate transactions unless the sender can verify that they are the owner of the sending wallet.

The UK requires full travel rule data for all VASP-to-VASP transfers over £1,000. Any transfers under this amount require less PII. More travel rule crypto regulations will come into effect in September 2023.

In South Africa, crypto service providers have been brought in line with AML/CFT legislative requirements, meaning they must report transactions of 25,000 ZAR (approximately $1,500) or more.

Singapore, in addition to Switzerland and Hong Kong, forbids exchanges from operating unless they have licenses that enforce travel rule compliance. All transactions fall under travel rule regulations in Singapore, but those transactions of S$1,500 or more are subject to additional beneficiary information, such as address and date.

Canada’s VASPs have been expected to comply with travel rule guidance since 2021 by sending a long list of information on all transactions above $1,000 CAD. This information includes, but is not limited to:

▪ the date of the transfer;

▪ if the client is a person, their name, address, date of birth and occupation, or in the case of a sole proprietor, the nature of their principal business;

▪ every transaction identifier including transaction hashes or similar identifiers (if applicable) and every sending and receiving address; and

▪ the exchange rates used and their source.

For more information on Canada’s travel rule requirements, see here.

The European Union announced just a few weeks ago that Markets in Crypto-assets rules (MiCA) would expand to cover both the source of funds and Travel Rule data exchange between CASP’s (crypto asset service providers) with no threshold.

Additionally, unhosted wallets will need to prove control/ ownership of the wallet when interacting with CASP’s in amounts over 1k euros.

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The Travel Rule Industry Standard

As of yet, the only major attempt to create an industry standard has come from the Travel Rule Universal Solution Technology (TRUST) consortium. The founding members include some of the biggest names in crypto, including: Bittrex, BlockFi, Coinbase, Gemini, Kraken, Robinhood, and many more. All TRUST members must meet core anti-money laundering, security, and privacy requirements before joining the solution.

As these big players are already enacting the travel rule, you must comply to be able to use their services. It’s best for all VASPs to become a part of the solution now so that they don’t get left behind when the regulations are more strictly enforced.

Ospree Flow will enable everyone to be on the same page. It’s the perfect solution for all VASPs to responsibly and seamlessly implement the travel rule regulations. Ospree Flow will be a part of the next update for our platform. Existing clients can turn it on with the click of a button.

Check out our introduction to Flow and sign up now to gain beta access to new features in the future.

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