For compliance professionals across Europe, the Transfer of Funds Regulation (TFR) plays a pivotal role in enhancing transparency and combating money laundering and terrorist financing. While its primary objective is to align with the Financial Action Task Force’s (FATF) “Travel Rule” for European Union (EU) member states, it’s equally important—but sometimes overlooked—that it also applies to the European Economic Area (EEA) member states, namely Norway, Iceland, and Liechtenstein. This blog post delves into how the TFR extends to the EEA, ensuring a homogeneous regulatory framework across the region.
TFR in the EEA: Not Just an EU Regulation
The TFR was first established under Regulation (EU) 2015/847*, mandating that financial service providers share information accompanying transfers of funds. This regulation is designed to combat money laundering and terrorist financing by ensuring transparency in financial transactions. When the regulation was introduced, the EEA Joint Committee, responsible for aligning EEA non-EU members with relevant EU regulations, formally incorporated it into the EEA Agreement.
EEA Joint Committee Decision No. 198/2016*, adopted on 30 September 2016, amended Annex IX (Financial Services) of the EEA Agreement to include the TFR, thereby extending its applicability to Iceland, Liechtenstein, and Norway. This decision ensured that non-EU EEA members implement the TFR within their financial systems, thus aligning their AML measures with EU standards.
The Complete List of EEA Countries Impacted by the TFR
Understanding which countries the TFR applies to is key for compliance. Here’s the full list of EEA member states:
EU Member States (27 countries):
- 🇦🇹 Austria
- 🇧🇪 Belgium
- 🇧🇬 Bulgaria
- 🇭🇷 Croatia
- 🇨🇾 Cyprus
- 🇨🇿 Czech Republic
- 🇩🇰 Denmark
- 🇪🇪 Estonia
- 🇫🇮 Finland
- 🇫🇷 France
- 🇩🇪 Germany
- 🇬🇷 Greece
- 🇭🇺 Hungary
- 🇮🇪 Ireland
- 🇮🇹 Italy
- 🇱🇻 Latvia
- 🇱🇹 Lithuania
- 🇱🇺 Luxembourg
- 🇲🇹 Malta
- 🇳🇱 Netherlands
- 🇵🇱 Poland
- 🇵🇹 Portugal
- 🇷🇴 Romania
- 🇸🇰 Slovakia
- 🇸🇮 Slovenia
- 🇪🇸 Spain
- 🇸🇪 Sweden
EEA EFTA States (3 countries):
- 🇮🇸 Iceland
- 🇱🇮 Liechtenstein
- 🇳🇴 Norway
It’s worth noting that 🇨🇭 Switzerland, although part of the European Free Trade Association (EFTA), is not a member of the EEA and is therefore not directly subject to the TFR.
How the TFR Enhances AML/CFT Measures Across the EEA
The TFR strengthens AML and Counter Financing of Terrorism (CFT) measures by requiring payment service providers to attach detailed payer and payee information to transfers of funds. For the EEA as a whole, this means consistent AML compliance standards for financial institutions across both EU and non-EU EEA states.
When Regulation (EU) 2023/1113* updated the TFR, it further extended these obligations specifically for virtual asset service providers (VASPs), bringing them under the same AML/CFT standards. This update is part of the EU’s broader Markets in Crypto-Assets (MiCA) framework, which aims to regulate cryptocurrency service providers consistently across the EEA.
This update extended obligations to VASPs across the EEA as part of the region’s coordinated AML/CFT strategy and ensured that virtual asset transfers include necessary information about the originator and beneficiary, aligning with the FATF’s Travel Rule.
Implications of the TFR for Financial Institutions and VASPs in the EEA
The TFR’s incorporation into the EEA Agreement means that financial institutions, including VASPs in Iceland, Liechtenstein, and Norway, must now comply with the same AML requirements as those in the EU. This uniformity is essential for:
- Legal Alignment: Ensuring a homogenous legal framework across all EEA member states.
- Compliance Requirements: Enforcing the same level of scrutiny for fund transfers within the EEA, enhancing transparency and reducing regulatory disparities.
- AML/CFT Strengthening: Bolstering defenses against money laundering and terrorism financing across borders, especially in high-risk sectors like virtual assets.
Why Compliance Professionals Shouldn’t Overlook EEA Obligations
For compliance officers, particularly those dealing with cross-border transactions, it’s essential to remember that the TFR’s obligations span the entire EEA. Ignoring the non-EU EEA countries—Norway, Iceland, and Liechtenstein—can lead to gaps in compliance, risking penalties and reputational damage. Every compliance framework and transaction protocol should therefore account for the TFR’s reach across these territories.
The TFR is not just an EU obligation; it applies to the entire EEA, including Iceland, Liechtenstein, and Norway. Its aim is to create a consistent and robust AML framework across Europe, aligning the EEA non-EU members with the EU’s AML/CFT standards. Compliance professionals and financial institutions should ensure that their policies and procedures reflect this broader scope of the TFR, safeguarding against regulatory and operational risks in today’s complex financial landscape.
Where to Find Further Guidance on EEA Compliance
The EFTA Secretariat offers access to legal texts and guidance on implementing EU regulations within the EEA, including the TFR. Additionally, each EEA EFTA state’s financial supervisory authority provides national guidelines to help institutions comply with the regulation’s requirements.
For more detailed information on the TFR’s integration into the EEA, refer to EEA Joint Committee Decision No 198/2016, published in the EEA Supplement to the Official Journal of the European Union. The official EFTA website also provides a repository of EEA-related legislative documents, ensuring that compliance professionals have the resources they need to meet EEA-wide AML standards.
*Sources
Regulation (EU) 2015/847 - https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32015R0847#ntr2-L_2015141EN.01000101-E0002
EEA Joint Committee Decision No. 198/2016 - https://www.efta.int/sites/default/files/documents/legal-texts/eea/other-legal-documents/adopted-joint-committee-decisions/2016%20-%20English/198-2016.pdf
Regulation (EU) 2023/1113 - 3 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R1113
