Andorra -- Travel Rule Implementation Regulatory Overview

Andorra, as a jurisdiction committed to international standards for combating money laundering and terrorist financing (AML/CFT) and a member of the Council of Europe's MONEYVAL, has implemented the FATF Travel Rule principles into its legal framework.

Here's a breakdown of the status:

1. Whether Adopted

Yes, the principles of the FATF Travel Rule are adopted in Andorra. While not explicitly termed "Travel Rule" in the primary legislation, the requirements for Virtual Asset Service Providers (VASPs) to collect, verify, and transmit originator and beneficiary information for virtual asset transfers are incorporated through its AML/CFT framework, specifically enhanced by legislation governing digital assets.

The key legislative instruments are:

• Law 11/2021, of 17 June, on digital assets (Llei 11/2021, del 17 de juny, de regulació dels actius digitals): This law establishes the legal framework for digital assets and defines the entities that provide services related to them (VASPs). It brings these entities under the supervision of the Institut Nacional Andorrà de Finances (INAF) and subjects them to AML/CFT obligations.
  • Official Source (Catalan): https://www.bopa.ad/bopa/033025/Pagines/DOC20210617_21_21_21_.aspx
• Law 9/2005, of 21 February, on the prevention of money laundering and terrorist financing (Llei 9/2005, del 21 de febrer, qualificada de prevenció del blanqueig de diners o valors i del finançament del terrorisme): This is Andorra's overarching AML/CFT law, which has been amended over time to align with international standards, including applying to VASPs as 'obligated entities'.
  • Official Source (Catalan, original): https://www.bopa.ad/bopa/017017/Pagines/DOC20050221_18_17_.aspx (Numerous amendments exist, so referring to the consolidated version used by INAF is best practice).

2. Effective Date

• Law 11/2021 was published on June 17, 2021, and came into force shortly thereafter, specifically bringing digital asset service providers under the AML/CFT regime.
• The general Law 9/2005 has been in effect since 2005, with subsequent amendments ensuring its application to emerging sectors like virtual assets. Therefore, VASPs operating in Andorra have been subject to AML/CFT obligations, including those akin to the Travel Rule, since the enactment of Law 11/2021 and subsequent regulatory developments from INAF.

3. Threshold Amounts

Andorra generally aligns with FATF recommendations for the Travel Rule. This means:

• Zero Threshold for VASP-to-VASP Transfers: For virtual asset transfers between two regulated VASPs, basic originator and beneficiary information (name, account number/wallet address) is required to be transmitted regardless of the amount.
• De Minimis Threshold for Additional Information: For transfers exceeding EUR 1,000 (or equivalent in virtual assets), VASPs are generally required to obtain and transmit more detailed information, including:
  • Originator Information: Name, physical address, national identity number (or customer identification number), date of birth, place of birth.
  • Beneficiary Information: Name, physical address, national identity number (or customer identification number), date of birth, place of birth.
• Unhosted Wallet Interactions: When a VASP interacts with an unhosted (self-custodied) wallet, enhanced due diligence and verification of the unhosted wallet's beneficial owner are typically required for transactions above the EUR 1,000 threshold. Below this, the VASP still needs to collect relevant information from its customer initiating or receiving the transfer.

These thresholds are consistent with FATF Guidance on Virtual Assets and Virtual Asset Service Providers.

4. Which VASPs Are Covered

Law 11/2021 explicitly defines and covers a broad range of services related to digital assets, meaning the following entities acting as VASPs are subject to the Travel Rule principles and AML/CFT obligations in Andorra:

• Providers of exchange services between virtual assets and fiat currencies.
• Providers of exchange services between one or more forms of virtual assets.
• Providers of transfer services of virtual assets.
• Custody service providers of virtual assets (wallet providers).
• Issuers of digital assets (in certain contexts, particularly where they also provide related services).

These entities require authorization and supervision by the INAF (Institut Nacional Andorrà de Finances).

• INAF Website: https://www.inaf.ad/

5. Technical Implementation Requirements

Andorran legislation, like most national laws, does not prescribe a specific technical solution (e.g., TRISA, OpenVASP, Sygna, Travel Rule Protocol). Instead, it mandates that VASPs must:

• Collect and Store Information: Implement robust systems to accurately collect, verify, and securely store the required originator and beneficiary information.
• Transmit Information: Establish reliable and secure methods to transmit this information to the beneficiary VASP during or before the virtual asset transfer.
• Risk-Based Approach: Develop and implement a risk-based AML/CFT program that includes policies, procedures, and internal controls to comply with the Travel Rule.
• Data Protection: Ensure that the collection, storage, and transmission of personal data comply with Andorra's data protection laws, which align with EU GDPR standards.
• Interoperability: Be prepared to interact with a variety of solutions used by other VASPs globally.

INAF expects VASPs to demonstrate how they comply with these requirements through their internal policies and technological solutions.

6. Penalties for Non-Compliance

Non-compliance with AML/CFT obligations, including those related to the Travel Rule, can result in significant penalties under Andorran law. These are typically outlined in Law 9/2005 (as amended) and other specific regulations, and can include:

• Administrative Fines: Substantial monetary penalties, which can be significant and vary based on the severity of the breach, the VASP's size, and previous compliance history.
• Suspension or Revocation of License: The INAF has the power to suspend or revoke a VASP's operating license.
• Public Censure: Publication of regulatory sanctions, which can severely damage a VASP's reputation.
• Orders to Cease and Desist: Requirements to stop certain activities until compliance issues are resolved.
• Criminal Charges: In severe cases, especially those involving intentional money laundering or terrorist financing facilitation, individuals and corporate officers may face criminal prosecution, leading to imprisonment and heavier fines.

These penalties underscore the seriousness with which Andorra treats AML/CFT compliance for all obligated entities, including VASPs.

Disclaimer: This information is for general informational purposes only and does not constitute legal advice. For specific legal guidance regarding FATF Travel Rule compliance in Andorra, it is essential to consult with legal professionals specializing in Andorran AML/CFT law and digital asset regulations.