Regulation (EU) 2023/1113 – Transfer of Funds Regulation (TFR)
- Issuing authority
- European Parliament and Council of the European Union
- Effective date
- Applies from 30 December 2024
- Scope
- European Union
Key requirements
The Transfer of Funds Regulation has applied across all 27 EU Member States since 30 December 2024. To support consistent implementation, the European Banking Authority (EBA) has issued Guidelines explaining how CASPs should apply the Travel Rule, including the information that must accompany crypto transfers and how firms should deal with missing or incomplete information. The Guidelines also encourage interoperability between different Travel Rule messaging solutions, helping regulated firms securely exchange the required information and reducing compliance failures caused by incompatible systems. As implementation has matured, supervisors have shifted their focus from initial implementation to assessing whether firms are effectively applying the Travel Rule in practice.
Quick Summary
The Transfer of Funds Regulation (TFR) extends the Travel Rule to cryptoasset transfers in the European Union. It requires Crypto-Asset Service Providers (CASPs) to collect and share information about the sender and recipient of crypto transfers. The aim is to make crypto transfers more transparent, helping to prevent money laundering and terrorist financing.
What is it?
TFR is the crypto equivalent of the rules that already apply to bank transfers. When money is sent through a bank, information about the payer and payee travels with the payment. The TFR applies the same principle to cryptoassets. Whenever crypto is transferred between regulated Crypto-Asset Service Providers (CASPs), information about the originator and beneficiary must accompany the transfer. This allows firms and authorities to trace transactions where necessary and helps reduce the misuse of cryptoassets for financial crime.
Who does it apply to?
- Crypto-Asset Service Providers (CASPs)
- Crypto exchanges
- Crypto custodians
- Crypto brokers
- Payment service providers involved in transfers
- Intermediary CASPs
Why does it matter?
Crypto transfers can move across borders within seconds, making them attractive for criminals seeking to hide or move illicit funds. The TFR increases transparency by ensuring that key information travels with crypto transfers. It also aligns the European Union with the FATF Travel Rule, strengthening international efforts to combat money laundering and terrorist financing.
What should firms do?
- Apply additional checks for transfers involving self-hosted wallets where required by the Regulation.
- Monitor and report suspicious activity in line with their AML obligations.
- Train staff on the Travel Rule requirements.
AboutAML Breakdown
When crypto is transferred between two regulated Crypto-Asset Service Providers (CASPs), information about both the sender (originator) and the recipient (beneficiary) must travel with the transaction. Unlike many traditional payment rules, there is no minimum threshold for these information requirements when both parties are CASPs. The Regulation also introduces additional requirements for self-hosted wallets. Where a transfer exceeding €1,000 takes place between a CASP and a self-hosted wallet, the CASP must verify the accuracy of information relating to the ownership or control of that wallet using an appropriate method. The information collected under the TFR should not be viewed in isolation. It also supports a firm's wider AML framework, including customer due diligence, transaction monitoring, and sanctions screening. Together, these measures make crypto transfers more transparent and more difficult to misuse for money laundering or terrorist financing.