Travel Rules & FATF – an article by Katharina Lasota Heller & Allison Fromm

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The Travel Rule, established to monitor how money ‘travels’, obliges financial institutions to share information about transaction originators and beneficiaries in order to quickly detect suspicious transactions and fight money laundering.

In June 2019, FATF (Financial Action Task Force), an intergovernmental organization created to fight money laundering, stated that virtual assets (cryptocurrencies and asset tokens) have to follow the Travel Rule unless only one party uses VASP, or VASP is not used at all. Switzerland’s rules on VASP use are stricter, as in 2019, the Swiss Financial Market Supervisory Authority (FINMA) informed that Virtual Asset Service Providers (VASPs) are subject to anti-money laundering regulations and have to meet legal certain requirements, no matter if they transfer cryptocurrencies or different assets.
FINMA’s standards oblige both VASPs participating in a given transaction to be based in countries with strong anti-money laundering regulations in place.

Certain countries, such as North Korea and Iran, are completely blacklisted so transactions between them and Switzerland are not accepted. Some countries, for example, Syria, Albania, and Pakistan qualify for increased monitoring so whether transactions to these countries are accepted depends on every case individually.
Additionally, FINMA obliges Swiss VASPs to confirm the identity of all involved parties of transactions, even if the owner of funds transfers his own funds between different wallets.
Such verification can be quickly done if an involved party is a VASP customer, otherwise, a VASP needs to seek other means of confirming the identity of all involved parties.
Such regulations introduce increased monitoring of decentralized finances, which is a subject of debate in the financial world.

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