Argos KYC News & Insights

Meaning of the Travel Rule and its Relation to Crypto and Virtual Assets

FATF’s ‘Travel Rule’ requirements expand to the virtual asset(VA) and virtual asset service providers(VASP)

Words explained
Financial Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing, and more. The FATF Recommendations are recognized as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.

Travel rule is a process that takes and records the information regarding the money transfer. It requires financial institutions to know the money wire information from both the originator and the beneficiary. Once the necessary information is shared with each bank, it will release the funds at the end destination. The rule was implemented with the aim to detect criminals, terrorists, and sanctioned individuals regarding suspicious fund transactions. Money can be used for different purposes, sometimes used on financing illegal actions. Travel rule is one of many methods to detect suspicious activities. Under the FATF guidance, the ‘Travel Rule’ applies to any transaction over USD/EUR 1000.

Now with the dramatic rise and expansion of the cryptocurrency industry, FATF has expanded the same obligations to virtual asset and virtual asset service providers. Here is what FATF’s Recommendation 15 and 16 explains in relation to virtual assets and travel rule.

  • R. 15 – For the purposes of applying the FATF Recommendations, countries should consider virtual assets as “property,” “proceeds,” “funds,” “funds or other assets,” or other “corresponding value.” Countries should apply the relevant measures under the FATF Recommendations to virtual assets and virtual asset service providers (VASPs).
  • R. 16 – Countries should ensure that originating VASPs obtain and hold required and accurate originator information and required beneficiary information on virtual asset transfers. Countries should ensure that beneficiary VASPs obtain and hold required originator information and required and accurate beneficiary information on virtual asset transfers and make it available on request to appropriate authorities.

With such travel rule implementation which functions as a key AML/CFT measurement, financial institutions and VASPs would be able to conduct sanctions screening and detect suspicious transactions. According to the updated report regarding the FATF STANDARDS ON VIRTUAL ASSETS AND VIRTUAL ASSET SERVICE PROVIDERS, the vast majority of jurisdictions have not yet fully implemented FATF R.15/IN.15 requirements.

As of March 2022, while 29 out of 98 responding jurisdictions reported having passed Travel Rule legislation, only 11 jurisdictions have started enforcement and supervisory measures. Recent FATF consultations highlight that many VASPs are still in the very early stages of implementing the Travel Rule and that some VASPs still need to deepen their understanding of the scope of FATF’s Travel Rule requirements.

ARGOS KYC functions as a key to making various VASPs comply with FATF’s Travel Rule. VASPs operating in countries that have fully implemented the FATF R.15 requirements, have to adapt to the Travel Rule as it functions as enforcement and supervisory measures. ARGOS KYC, providing KYC and AML screening services to VASPs, helps not only to comply with the enforcement but also to protect the business from any illicit actions.

Contact ARGOS KYC for more information and coverage regarding the KYC and AML Screening. Got you covered.