Travel Rule in El Salvador: Monitoring Financial and Virtual Asset Transactions

David Blanco, lawyer in El Salvador and expert in Compliance and Anti-Money Laundering, shares this article on the Travel Rule as a fundamental tool in the prevention of Asset and Money Laundering, Counter-Terrorism Financing, and Counter-Proliferation of Weapons of Mass Destruction (AML/CFT/CPF) in Financial Institutions and Virtual Asset Service Providers. 

The Travel Rule is the commonly used term for Recommendation 16 of the Financial Action Task Force (FATF). Among the FATF's 40 Recommendations to promote effective measures against AML/CFT/CPF, Recommendation 16 was developed to prevent criminals from freely using electronic transfers within financial institutions, thus hindering the unrestricted flow of funds derived from illicit activities. 

The Travel Rule has also gained significance in the context of cryptocurrencies and virtual assets due to their nature and characteristics, virtual asset transfers can be used to conceal funds derived from criminal activities. In this regard, the FATF, through its Guidelines on Virtual Asset Regulation issued in August 2023, recommended to countries apply the transfer rules established in Recommendation 16, with appropriate modifications, to Virtual Asset Service Providers (VASPs) and virtual asset transfers. 

In El Salvador, the Travel Rule has been incorporated as a mandatory preventive measure for financial institutions and VASPs in the Instructions for the Prevention, Detection, and Control of AML/CFT/CPF issued by the Financial Investigation Unit (FIU) of the Attorney General's Office. 

For financial institutions, this obligation entails reporting all electronic transfers, regardless of the amount, to the FIU using the designated forms. These reports must include minimum information to identify the originator and beneficiary of the transfer. VASPs, on the other hand, must maintain records of all transactions involving virtual assets conducted by their clients, preserving information regarding the origin and destination of such transactions. 

Finally, the specific information that must be collected to comply with the Travel Rule should be detailed in the AML/CFT/CPF prevention Policies of financial institutions and VASPs. Incorporating these elements into the respective Policies reinforces and ensures effective prevention of AML/CFT/CPF. 

The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.