Travel Rule


Travel Rule required from
Travel Rule regulation still pending
January 28, 2020

TLDR The Monetary Authority of Singapore (MAS) introduced guidance for the crypto industry covering the Travel Rule on December 5th, 2019. It went into effect on January 28th, 2020. It requires VASPs to implement the travel rule for all transaction sizes and prove ownership of non-custodial wallets.

In addition to guidance on the Travel Rule, Singapore introduced a new law, the Payment Services Act, that requires crypto businesses operating in Singapore to be registered and licensed. The Act came into effect on January 28, 2020. Crypto firms and exchanges fall under the definition “digital payment token services", and will now have to comply with anti-money laundering (AML) and counter financing of terrorism (CFT) requirements.

MAS has provided an exemption period, during which entities who fall under this definition and want to continue operating in Singapore need to notify MAS and apply for a license. As of the 21st of June 2020, there were 195 entities who identified themselves as providing “digital payment token services” and had notified MAS (see link). This exemption period expires on July 28, 2020, for crypto firms, after which all registered crypto firms in Singapore will need to be compliant with local MAS regulations on AML/CFT, including the Travel Rule.

In their “Notice to holders of Payment Service License (Digital Payment Token Services) about Prevention of Money Laundering from December 5th, 2019”, MAS covers the Travel Rule in paragraph 13:

13.1 Paragraph 13 shall apply to a payment service provider when it effects the sending of one or more digital payment tokens by value transfer or when it receives one or more digital payment tokens by value transfer on the account of the value transfer originator or the value transfer beneficiary but shall not apply to a transfer and settlement between the payment service provider and another financial institution where the payment service provider and the other financial institution are acting on their own behalf as the value transfer originator and the value transfer beneficiary.

MAS does not have a transaction size cut-off for the Travel Rule to apply. However, for transactions below S$1,500, only the following information is required to be shared:

  • Originating customer’s name and account number
  • Beneficiary’s name and account number (in receiving institution)

It’s interesting to note that to be covered by this simplification, the following rules apply KYC and full originating customer information need to be provided by the originating institution on request within three business days to either the beneficiaries, the MAS itself, or law enforcement authorities in Singapore.

The originating institution is required to fulfill this even if they are not in Singapore.

The MAS provided further guidance in their Guidelines about AML for Digital Payment Token Services from the 16th of March, 2020. In particular, of interest is their recommendation on how VASPs should handle their interactions with non-custodial wallets.

13-7 For the avoidance of doubt, paragraph 13 of the Notice does not apply to transfers of DPT received from or made to persons who do not fall within the definition of an “ordering institution” or a “beneficiary institution” respectively. A payment service provider may therefore choose to engage in such transactions without applying the requirements set out in paragraph 13. However, as required under paragraph 6.27 of the Notice, the payment service provider should recognise that such transactions may present higher ML/TF risks, and apply appropriate enhanced risk mitigation measures, which could include but are not limited to – (a) identifying and verifying the identities of the originator and beneficiary of the transfers: (i) where the transfer of DPT has been received from or sent to the payment service provider’s own customer’s personal wallet address, requiring the customer to demonstrate control over the said wallet address, by effecting a transfer of DPT of an amount specified by the payment service provider;

In other words, this aligns with the FATF guidelines on Virtual Assets that VASPs can send funds to non-custodial wallets, but they should KYC the owner and prove they control it.

At Notabene, we can help you prove the ultimate beneficial ownership of your customers’ blockchain accounts, for both custodial and non-custodial wallets.

Last updated
June 22, 2020