Caution: Introduction of Travel Rule & Self-hosted Wallets

Introduction of Travel Rule & Self-hosted Wallets

Old World:

What is the FATF Travel Rule?

The Travel Rule of the Financial Action Task Force (FATF), also known as Recommendation 16, has actually been around for many years, and most compliance officers are familiar with it. We've all seen it with "traditional" bank transfers. When making bank transfers, a personal identification document must be provided during the transfer. Without it, the banks involved will not process the transfer. This typically includes the name, address, and account number of the account holder, along with relevant information about the recipient of the transfer. We are so accustomed to this process that we don't even think twice about providing this information. This is an example of the Travel Rule in the traditional banking context. However, times are changing, and we are entering a new era of transactions with virtual assets. The way we express value is changing. These changes are exciting but can also bring additional risks. In this context, FATF proposed extending the existing Travel Rule to the transfer of virtual assets.

In simple terms, the Travel Rule in the crypto context refers to the exchange of information when a transfer of virtual assets occurs between financial intermediaries in accordance with FATF Recommendation 16, as mentioned in "normal" bank transactions. The tricky part is that different jurisdictions have different requirements for how much information should be shared and when it should be shared. The general rule is $1,000, but there are exceptions to this amount, such as in Switzerland, where the threshold is $0. For any transaction exceeding this amount, information must be exchanged between the originator - the person sending the virtual money - and the beneficiary - the person receiving the virtual assets. Furthermore, this information must be transmitted promptly and securely.

See the individual countries in the following article.

Information that must be exchanged

FATF developed the Travel Rule to help law enforcement agencies keep track of individuals sending and receiving funds through official money transfer systems. This vigilance prevents, detects, investigates, and prosecutes money laundering, sanction violations, and other financial crimes.

In this context, the following information must be verified by the Originator VASP before the transaction:

• Name of the originator,
• Originator's account number,
• Physical address of the sender OR
• National identity number of the sender or customer identification or date and place of birth.

The following information must be verified by the Beneficiary VASP before the transaction:

• Name of the beneficiary,
• Beneficiary's account number.

The verification process is just one part of the core of the Travel Rule. To successfully implement the Travel Rule, this information must be transmitted and stored with the beneficiary VASP. The information provided above is indicative. Please note that these requirements may vary from country to country. Before conducting transactions, check the information required in the jurisdiction where you are conducting transactions.

New World:

VASP
Virtual Asset Service Providers are blockchain service providers such as exchanges and wallet providers and trading platforms. Examples: Bitcoin Suisse, SEBA, Kraken, Coinbase

Self-hosted (non-custodial/external) Wallet
A wallet is used to store virtual assets. Self-hosted means that the wallet owner has full control over the wallet because they possess the private key required for making transfers. Examples: Edge Wallet, Ledger, Trezor, BitBox

Country	Status	Date of implementation	De minimis threshold
Austria	Implemented	23-Feb-2022	EUR 1,000
Bahamas	Implemented	2020	BSD $1,000
Bermuda	Implemented	2018	USD 1,000
British Virgin Islands	Implemented	1-Dec-2022	USD 1,000
Canada	Implemented	1-Jun-2021	CAD 1,000
Cayman Islands	Implemented	1-Jul-2022	Any transaction
Cyprus	Implemented	2021	EUR 1,000
El Salvador	Implemented	7-Sep-2021	USD 1,000
Estonia	Implemented	15-Mar-2022	Any transaction
Germany	Implemented	1-Oct-2021	EUR 1,000
Gibraltar	Implemented	22-Mar-2022	EUR 1,000
Hong Kong	Implemented	1-Jun-2023	USD 8,000
Indonesia	Implemented	1-Oct-2021	USD 1,000
Israel	Implemented	14-Nov-2021	Any transaction
Japan	Implemented	1-Apr-2022	JPY 100,000
Liechtenstein	Implemented	1-Jun-2021	CHF 1
Malaysia	Implemented	1-Apr-2021	Any transaction
Mauritius	Implemented	7-Feb-2022	Any transaction
Nigeria	Implemented	2022	USD 1,000
Philippines	Implemented	2021	P 50,000.00
Portugal	Implemented	5-Jul-2023	No threshold
Singapore	Implemented	28-Feb-2020	USD 1,500
South Korea	Implemented	25-Mar-2022	KRW 1 million
Switzerland	Implemented	1-Jan-2020	CHF 1,000
UAE	Implemented	1-Mar-2022	AED 3,500
USA	Implemented	2013	USD 3,000
Venezuela	Implemented	2021	EUR 1,000
Zambia	Implemented	2020	(a) an amount equal to or above Kwacha Equivalent of USD 10,000.00 (whether denominated in Zambian Kwacha or a foreign currency in relation to a legal person or legal arrangement) (b) an amount equal to, or above the Kwacha equivalent of USD 5,000.00 (whether denominated in Zambian Kwacha or a foreign currency in relation to an individual)
Lithuania	Expected	1-Jan-2025	Any transaction
United Kingdom	Implemented	1-Sep-2023	There is no information in relation to the de minimis threshold. However, the particular requirements are applied if transaction is exciding EUR 1,000 (see the sections "The presence of differences in domestic and cross-border transfers" and "VA transfer in case unhosted wallets or person other than a VASP").