The FATF Travel Rule requires virtual asset service providers to regulate information sharing for certain large transactions.
The Financial Action Task Force (FATF) travel rule refers to a regulatory guidance update to its Recommendation 16 that was implemented in 2019 as part of the FATF Standards to combat cases of crypto money laundering and terrorism funding (AML/CFT). The FATF Travel Rule, derived from the United States’ Banking Secrecy Act (BSA), mandates that countries ensure that their domestically operating virtual asset service providers (VASPs), such as crypto exchanges and custodial platforms, implement the necessary tools to facilitate personal information sharing with transaction counterparty VASPs at the time of a transmittal for transactions exceeding 1,000 USD.
This is to allow government agencies the ability to collect data from any user who conducts financial transactions valued above 1,000 USD. Some of the collected information includes a user’s name, account number, and the details of the accounts they send their money to. Additional requirements cover the need for proof of address, identity, and date and place of birth, among others.
Under the same rule, VASPs and other financial institutions are obligated to share information with each other, especially in transactions that are covered by its threshold. They are also primarily responsible for ensuring that any information sent out to other participants is accurate and updated. This regulation defines any financial institution or cryptocurrency company as a Virtual Asset Service Provider (VASP).