FATF Travel Rule

Understanding the FATF Travel Rule

The FATF Travel Rule, which was introduced in 2019 as part of the FATF Standards, is an update to Recommendation 16 that provides regulatory guidance. Its main objective is to address the issues of money laundering and terrorism financing (AML/CFT) in the cryptocurrency industry. This rule is based on the Banking Secrecy Act (BSA) of the United States and requires countries to ensure that their domestic virtual asset service providers (VASPs), such as crypto exchanges and custodial platforms, have the necessary tools to share personal information with transaction counterparties VASPs for transactions that exceed 1,000 USD.

By implementing this rule, government agencies are able to gather data from users who engage in financial transactions valued above 1,000 USD. The collected information includes the user’s name, account number, and details of the accounts they transfer money to. Additionally, there are requirements for proof of address, identity, date and place of birth, and other relevant information.

Under the FATF Travel Rule, VASPs and other financial institutions are obligated to share information with each other, especially for transactions that meet the threshold set by the rule. They are also responsible for ensuring the accuracy and currency of the information shared with other participants. This regulation categorizes any financial institution or cryptocurrency company as a Virtual Asset Service Provider (VASP).

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