Tuesday, April 20, 2021

FATF retains ‘travel rule’ in new guidance, compelling exchanges to share customer data

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The Financial Action Task Force (FATF) has released its latest standards combating money laundering and terrorism, and it includes the much-debated “travel rule,” requiring exchanges to collect and transfer customer information during transactions.

In its February proposal, FATF said virtual asset providers (VASPs) may be required to obtain, hold and transmit both originator and beneficiary information. Now, the finalized guidance requires exchanges to gather and transfer originator name, originator account number (the VA wallet), originator’s location information, beneficiary name and beneficiary account number (their VA wallet).

Ahead of the guidance, exchange leaders discussed the feasibility of these requirements, with groups like Chainalysis and Global Digital Finance sending letters with feedback. Adhering to these guidelines globally would require unprecedented collaboration and could be costly to implement, according to leaders at Circle, Coinbase and Chainalysis.

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Michael Harris, Director Financial Crime Compliance and Reputational Risk at LexisNexis Risk Solutions, said even with the finalized guidance, questions remain.

“With all regulation, the devil will be in the detail, and whilst the guidance being published is very much welcomed, there are many unresolved issues,” Harris said. “By its very nature, blockchain technology makes it difficult to identify the parties involved in payments made via these platforms, and it’s this lack of transparency which is in direct conflict with the successful monitoring of illicit activity.”

While the guidance isn’t binding, it could have widespread influence since nations that don’t comply could isolate themselves from their peers; the G20 nations already affirming their intention to hold to FATF guidelines.

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