The Crypto Travel Rule 2024

10 січня 2024 326 IT комiтет, Банківський комiтет
Світлана Рудюк

WEB-3 and tax lawyer

The Travel Rule is a FATF Recommendation 16, which established the prevention of money laundering and terrorist financing rules. Recommendation 16 applies to cross-border wire transfers and domestic wire transfers.

The main principles

Countries should ensure that financial institutions include required and accurate originator information, and required beneficiary information, on wire transfers and related messages, and that the information remains throughout the payment chain.

Countries should ensure that financial institutions monitor wire transfers to detect those that lack the required information and take appropriate measures.

Countries should ensure that, in the context of processing wire transfers, financial institutions take action to avoid illegal activity.

Countries should ensure that financial institutions include such information in the transfers: (i) the name of the originator; (ii) the name of the beneficiary; and (iii) an account number for each, or a unique transaction reference number. Such information need not be verified for accuracy unless there is a suspicion of money laundering or terrorist financing.

In June 2023, Regulation (EU) 2023/1113 of the European Parliament and of the Council of 31 May 2023 on information accompanying transfers of funds and certain crypto-assets and amending Directive (EU) 2015/849 was entered into force. Above Mentioned changes can be applied from December 30, 2024.

The main purpose of implementing the Directive (EU) 2015/849 was to establish the Travel Rule, regarding the crypto payments within the EU (and the outside).

These rules include the FATF’s approaches and define stronger requirements for sharing information than as defined in the Recommendations.

The Travel Rule for crypto states that all crypto companies must obtain, record and communicate accurate information of both the sender and recipient of virtual assets immediately and securely.

If the entity, established in a jurisdiction where the Travel Rule is implemented fails to comply, it could face local regulatory sanctions.

Up to now, only some countries have implemented the “Travel rule” as it was indicated in FATF’s report. It's not good, as it causes the additional dangers to the particular cross-border transaction chain.

Generally, I want to add that you need to be ready for the strengthening of control over transfers will make the compliance longer and more complex but the mentioned process will become safer.

The VASP's businesses must prepare to abide by these regulations or run the risk of losing their business.