On 31. March 2022, European Union lawmakers, through two committees in the European Parliament, jointly voted in favour of introducing a new tracing rule for crypto transfers which originates from the FATF (Financial Action Task Force) Travel Rule first proposed in 2019 — yet going one step further.
The FATF Travel Rule is an extension of the AML (anti-money laundering) and CFT (counter-financing of terrorism) obligations and applies to VASPs (Virtual Asset Service Providers) for cryptocurrency transactions valued at EUR 1’000 or higher. In compliance with the Travel Rule, a VASP is required to pass on specific customer and transaction related information to the VASP counterparty it deals with. In its latest guidance, the FATF expanded the Travel Rule and suggested that it should also apply to transactions between personal wallets (as per EU definition “unhosted wallets”) and not only to those from VASP to VASP (the rule does not include pure P2P transfers).
Countries are obliged to implement respective measures to comply with the Travel Rule in order to avoid ending up on the FATF black/grey list which could result in increased monitoring and economic sanctions. In line with this, the EU proposed a new tracing rule, going however beyond the FATF Travel Rule.
The EU tightened the rules and removed the EUR 1’000 threshold with the requirement of collecting, storing and verifying data for every single transfer. In addition, the proposed rules require the verification of “unhosted” wallets held by individuals under the tracing rule including a notification to the AML agency for cryptocurrency transaction. The lawmakers’ committees also want to introduce the creation of a list by the EU’s European Banking Authority of high-risk or non-compliant crypto-asset service providers.
The plans must also be agreed on by both the parliament and national ministers, who meet as the EU Council, in order to pass into law.
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