Digital Currency Exchanges and Remitters: is the FATF Travel Rule in Transit to Australia?

The Australian Attorney-General’s Department has commenced consultation on wide-ranging reforms to the anti-money laundering and counter-terrorism financing regime. According to the Attorney-General, the proposed reforms may modernise the travel rule in its application to digital currency exchanges and remittance providers. Amongst other things, this may affect the obligations of digital currency exchanges and remittance providers which are required to comply with the Australian AML/CTF regime.

What is the travel rule?

As noted by the Attorney-General, ”the travel rule is a requirement to include information about the payer and payee with a transfer of value as it is transferred from one business to another through a payment chain.”

What are the proposed reforms to the travel rule in Australia?

At present, financial institutions like banks are expected to include payer information (but not payee information) for electronic transfers of fiat currency. The Attorney-General notes that “the proposed reforms could update the financial institutions in line with the Financial Action Task Force Standards by requiring payer information to be verified, and require the inclusion of payee information. Reforms could implement the travel rule for remitters and digital currency exchange providers, requiring payer and payee information for transfers on behalf of customers to other businesses.”

What are the other reforms?

There are important reforms proposed to expand the regulation of digital currency exchanges. A business that enables the exchange from digital currency to fiat currency or vice versa is covered by the AML/CTF regime and must comply with certain obligations under the AML/CTF Act. The proposed reforms could extend the AML/CTF regulations to also cover the following activities:

• exchanges between one or more other forms of digital currency
• transfers of digital currency on behalf of a customer
• safekeeping or administration of digital currency
• provision of financial services related to an issuer’s offer and/or sale of a digital currency (e.g. Initial Coin Offerings where start-up companies sell investors a new digital token or cryptocurrency to raise money for projects

The proposed reforms are consistent with the global recommendations by the Financial Action Task Force.

Submissions and feedback can be submitted on the Department’s Consultation hub. The closing date for submissions is 16 June 2023.