What is Travel Rule

The Travel Rule is an international anti-money laundering (AML) and counter-terrorism financing (CFT) regulation introduced by the Financial Action Task Force (FATF), aimed at enhancing the transparency of cross-border fund transfers. It requires financial institutions to provide certain information about both parties involved in a cross-border payment or transfer and to "transmit" or "carry" this information along with the funds, in order to prevent money laundering, terrorist financing, and other financial crimes.

Important Update: According to the VASP regulations, the Travel Rule will be mandatory for deposit and withdrawal transactions on the KuCoin TR platform starting from February 24, 2025.

Key Requirements of the Travel Rule:

• Transmission of Customer Information: In cross-border payments and transfers, financial institutions (such as banks, payment service providers, etc.) must collect and share key information about the payer and the payee, including but not limited to:
  • Payer (sender) information: name, address, account number, etc.
  • Payee (receiver) information: name, address, account number, etc.
• Method of Information Transmission: This information must be transmitted along with the funds transfer, whether through electronic payments or traditional cross-border bank transfers. This means that both the payer's financial institution must record and transmit this information, and the payee's financial institution should also receive this information.
• Cross-Border Transfer Requirements: The Travel Rule generally applies to cross-border payments and transfers, especially when transactions involve different countries and financial systems. It ensures that cross-border transactions can be traced to the relevant parties, helping detect illegal fund flows.

Purpose of the Travel Rule:

• Combating Money Laundering and Terrorist Financing: By requiring the transmission of key information in cross-border transactions, the Travel Rule helps financial institutions monitor, track, and identify suspicious transactions, preventing money laundering and terrorist financing activities.
• Enhancing Financial Transparency: By ensuring the transparency of fund flows, the Travel Rule enhances the compliance and traceability of cross-border payments, reducing opportunities for anonymous transactions.
• Strengthening the Global Compliance Framework: The Travel Rule aims to standardize anti-money laundering and counter-terrorism financing measures globally. Especially in the context of the rapid development of financial technology and digital payments, it helps ensure the compliance of cross-border payment services.

Scope of Travel Rule:

The Travel Rule applies to most cross-border financial transactions and also cryptocurrency transaction, including but not limited to:

• Wire transfers and cross-border bank transfers between banks;
• Payment processing services (such as e-wallets and payment platforms);
• Remittance services (e.g., Western Union);
• Cryptocurrency transactions.