Travel Rule for VASPs – new rules from 30 December!
Regulation (EU) 2023/1113 of the European Parliament and of the Council of May 31, 2023 on information accompanying funds transfers and certain crypto-assets and amending Directive (EU) 2015/849 (hereinafter: Regulation 2023/1113) was published in the Official Journal of the EU in the middle of last year.
The new regulation will come into force on 30 December this year (2024). This means that as of that date, virtual-asset service providers (VASPs) will be required to comply with the new regulations on accompanying information on money transfers and crypto-assets. It is worth recalling what changes this regulation brings for the operation of industry players.
What is the Travel Rule?
The Travel Rule is an obligation to provide relevant sender and recipient information for each transaction. Until now, this rule applied to financial institutions, including payment institutions, as we wrote about HERE. The Regulation under discussion extends it to VASPs and applies to crypto-asset transactions.
The extension of the rule’s operation to cryptocurrency market players is aimed at enabling the tracking of crypto-asset flows and strengthening anti-money laundering (AML) and counter-terrorist financing (CFT) efforts. Regulation 2023/1113 also fully implements the recommendations of the Financial Action Task Force (FATF) in this regard.
What are the requirements of the Travel Rule?
The Travel Rule requires transaction information to include:
- Identity of the sender: name, address, account number or ID, and additional information to prove identity (e.g., ID card number).
- Recipient’s identity: recipient’s name or name, account number/ID.
- Transaction information: the value of the transaction, as well as information on the currencies or crypto-assets being transferred.
Another aspect is the obligations to collect, transmit and share this data with market participants in connection with executed transactions and with supervisory authorities in the exercise of supervision.
It will also affect the content of VASPs’ existing AML procedures and other internal regulations.
How to meet the requirements?
Implementation of Travel Rule requires adaptation of technological tools. Some players in the market are developing their own applications in this regard, while others are using systems provided by third parties. Regardless of the chosen path, the needs of VASPs in this area should be properly defined to fully meet regulatory requirements. The selection of a technology provider should be preceded by appropriate analysis.
Help with the implementation of the new rules
The DKP team supports VASPs in preparing for the implementation of processes implementing Travel Rule from the formal side, as well as in evaluating technology solutions in terms of meeting regulatory requirements.
Contact our team for professional assistance and to prepare for the changes that will come into force on 30 December!