Travel Rule

In October 2018, the Financial Action Task Force (FATF), the international anti-money laundering (AML) and terrorist financing watchdog, brought Virtual Asset Service Providers (VASPs) within the global AML and Combating the Financing of Terrorism (CFT) umbrella with its interpretive notes to Recommendation 15 on New Technologies. VASPs are financial institutions that manage virtual assets including cryptocurrencies. This meant that VASPs had to assess money-laundering risk posed by counter-party VASPs. Just as traditional banks and financial institutions must comply with Know Your Customer (KYC) and Customer Due Diligence (CDD) regulations, Recommendation 15 extends AML and CFT to VASPs. Instead of KYC, it’s Know Your VASP (KYV).

In June 2019, FATF modified its Recommendation 16 to include Virtual Asset Service Providers (VASPs). Under what is known as the “Travel Rule”, VASPs are required to share specific sender and receiver information for cross border cryptocurrency transactions over a set threshold. The Travel Rule is important as an AML and CFT regulation. It is designed to help law enforcement and regulatory authorities investigate suspicious transfers and illicit proceeds.

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