The Travel Rule: Journey So Far and Challenges Ahead

Implementation of the Travel Rule continues to be a challenge within the industry. In June 2023, FATF released their latest update on country compliance with FATF’s Recommendation 15, including the Travel Rule. From the update, it's clear that progress around implementation has been slow and indeed, FATF commented that:

jurisdictions have made insufficient progress on implementing the Travel Rule, which is a key AML/CFT measure

Just before the latest FATF update came out, I spoke with Carolyn Wright from Radio Television Hong Kong (RTHK) on the importance of the Travel Rule. Whilst the latest update shows some progress, all of the key themes from the previous FATF update remain. 

The Sunrise Issue, the period when the Travel Rule is not in full effect across all jurisdictions, continues to make it difficult for Virtual Asset Service Providers (VASPs) to comply with the Travel Rule requirement. Challenges around global implementation requiring the coordination of global regulations, business and technologies are also still not fully in place.

Some of the key statistics around the Travel Rule highlighted in the June 2023, FATF update include:

• 54% or 73/135 respondents (excluding those that prohibit VASPs) have taken no steps towards Travel Rule implementation
• 66% or 25/38 respondents, of the jurisdictions who assessed VAs/VASPs as high risk and do not take a prohibition approach, have not yet passed legislation implementing the Travel Rule. 
• 58 jurisdictions have now passed legislation or regulation to implement the travel rule, up from 29 in 2022.
• Only 21% or 13/62 respondents have issued findings/directives or taken enforcement or other supervisory actions against VASPs focused on Travel Rule compliance, up from 11 in 2022.

As in 2022, FATF has called on all countries to rapidly implement their Standards on Virtual Assets and VASPs, including the FATF’s Travel Rule.

In my discussion with RTHK you can hear more on:

• What the Travel Rule is and what data it involves sharing
• The challenges with implementing the Travel Rule
• How much of a drive there is towards jurisdictional adoption
• Why people may want to disguise their identity when making a transaction
• How it can help with implementing and enforcing sanctions

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