What is the Travel Rule?

The Travel Rule is a global anti-money laundering (AML) requirement that mandates Virtual Asset Service Providers (VASPs) to collect, verify, and share originator and beneficiary information when processing cryptocurrency transactions above a certain threshold. This requirement, introduced by the Financial Action Task Force (FATF), aims to prevent illicit activities such as money laundering and terrorist financing by ensuring transparency in digital asset transfers.

Operational Impact of the Travel Rule on VASPs

• Customer Due Diligence (CDD) - VASPs must collect, verify, and store originator and beneficiary information before processing transactions, increasing compliance workload.

• Technology & Integration Requirements - VASPs need to implement Travel Rule-compliant solutions to exchange data with counterparties, which may require API integrations for automation or manual processes for handling low-volume operations.

• Transaction Delays & Customer Impact - Transactions can be delayed or rejected if counterparties fail to provide required information, impacting customer experience.

• Managing Non-Compliant Counterparties - VASPs must establish processes to manage interactions with counterparties that lack Travel Rule compliance.

👋 Want to know more? Dive into our write-up about the Travel Rule.