Transfer of Funds Regulation (TFR) 2023/1113
- Issuing authority
- EU
- Effective date
- Applies from 30 December 2024
- Scope
- All EU Member States
Key requirements
Brings the 'Travel Rule' to crypto in the EU. When crypto moves between two regulated firms (CASPs), both must collect and share information about who sent it and who received it , exactly like a bank wire transfer. For transfers above €1,000 involving an unhosted wallet (someone's personal crypto wallet), the CASP must verify the wallet belongs to their customer.
Quick Summary
The Transfer of Funds Regulation (TFR) extends the Travel Rule to cryptoasset transfers in the EU. It requires crypto asset service providers (CASPs) to collect and share information about the sender and the recipient of crypto transfers, helping authorities trace transactions and reduce the risk of money laundering and terrorist financing.
What is it?
TFR is the crypto version of the rules that already apply to bank transfers. When money is sent between banks, information about the sender and the recipient travels with the payment. The TFR applies the same idea to crypto transfers so that regulated crypto firms know who is sending and receiving funds.
Who does it apply to?
- Crypto Asset Service Providers (CASPs)
- Crypto exchanges
- Crypto custodians
- Financial institutions offering crypto services
- AML and compliance professionals
- Supervisory authorities
Why does it matter?
Crypto transactions can move across borders quickly and, in some cases, make it harder to identify the people involved. The TFR increases transparency by ensuring that important information travels with crypto transfers, making it easier to detect suspicious activity and investigate financial crime.
What should firms do?
- Collect and share the required information about the sender and recipient of crypto transfers.
- Ensure Travel Rule requirements are built into their payment and compliance systems.
- Verify ownership of unhosted wallets where required under the Regulation.
- Monitor crypto transactions for suspicious activity.
- Update AML policies, procedures, and staff training to reflect the TFR requirements.
AboutAML Breakdown
The Travel Rule doesn't stop people from using crypto. Instead, it makes crypto transfers more transparent. Imagine sending money through your bank. Your bank already knows who sent the money and who is receiving it. The TFR applies a similar principle to regulated crypto firms by requiring them to exchange information about both parties involved in a transfer. The Regulation also introduces additional checks for certain transfers involving unhosted wallets, which are personal crypto wallets controlled by individuals rather than a regulated crypto company. This helps firms better understand who they are dealing with and reduces the risk that crypto is used to hide criminal activity.