Travel Rule

🔹 Definition

The Travel Rule is an AML/CFT regulation that requires financial institutions and Virtual Asset Service Providers (VASPs) to transmit specific identifying information about the originator and beneficiary when executing certain types of transactions—especially cross-border wire transfers and virtual asset transfers. Its main purpose is to enhance transparency and traceability, helping authorities detect and disrupt illicit financial flows.

Initially introduced under the U.S. Bank Secrecy Act (BSA), the Travel Rule has since been adopted globally via FATF Recommendation 16, with adaptations for crypto transactions.

🔹 Frequently Asked Questions (FAQs)

Q1: What information must be included under the Travel Rule?
For both traditional financial institutions and VASPs, the following information must typically “travel” with the transaction:

• Originator’s details:
  • Full legal name
  • Account number or wallet address
  • Residential or business address, or national ID number, or date and place of birth
• Beneficiary’s details:
  • Full legal name
  • Account number or wallet address

Q2: When does the Travel Rule apply?

• For cross-border wire transfers exceeding a threshold (e.g., USD/EUR 1,000)
• For virtual asset transfers between two regulated VASPs
• Some jurisdictions apply the rule even to domestic or lower-value transactions
• In Singapore, the MAS Notice PSN02 and AML/CFT Notices for VASPs implement the rule in crypto transfers

Q3: How is the Travel Rule applied to virtual assets (e.g., crypto)?

• VASPs must identify both the sender and recipient, and ensure the required information is collected and transmitted before processing
• Information must be shared securely and in real time, often using Travel Rule protocols such as:
  • TRISA, OpenVASP, TRP, or Notabene
• Applies to transactions involving hosted wallets; may exclude unhosted/self-custodial wallets, depending on the jurisdiction

Q4: What are the compliance risks of not implementing the Travel Rule?

• Regulatory penalties for failure to collect or transmit required data
• Being classified as a non-compliant or high-risk VASP, losing banking or licensing access
• Higher risk of facilitating terrorism financing or sanctions evasion
• Inability to onboard clients in Travel Rule-compliant jurisdictions

Q5: How should companies prepare for Travel Rule enforcement?

• Conduct gap assessments against jurisdiction-specific Travel Rule requirements
• Implement technical solutions for secure data exchange with counterparties
• Enhance KYC procedures to capture required information at onboarding
• Align policies with FATF, MAS, and other regional regulatory bodies
• Train compliance and operations teams on crypto-specific Travel Rule obligations