Chile -- Travel Rule Implementation Regulatory Overview

Chile has made significant progress in implementing the FATF Travel Rule, primarily through regulations issued by its Financial Analysis Unit (Unidad de Análisis Financiero - UAF), which is the country's Financial Intelligence Unit (FIU).

Here's a breakdown:

Status of FATF Travel Rule Implementation in Chile

• Overall Status: Chile has officially adopted the principles of the FATF Travel Rule for Virtual Asset Service Providers (VASPs). The key regulatory instrument is UAF Circular N° 79, issued in 2022, which designates VASPs as obliged entities for AML/CFT purposes and requires them to comply with FATF Recommendation 16 (the Travel Rule) among other obligations.

• Whether Adopted: Yes, it has been adopted. The UAF Circular N° 79 explicitly references FATF Recommendations and mandates their application to Virtual Asset Service Providers (PSAVs - Proveedores de Servicios de Activos Virtuales).

• Effective Date:

  • UAF Circular N° 79 was issued and became effective on July 11, 2022. This circular brought PSAVs under the scope of AML/CFT obligations in Chile, including the principles of the Travel Rule.
  • Chile received a follow-up assessment by FATF in May 2023, where its technical compliance rating for Recommendation 15 (New Technologies, including virtual assets) was upgraded from "Partially Compliant" to "Largely Compliant," largely due to the implementation of Circular N° 79.

• Threshold Amounts:

  • UAF Circular N° 79 adopts the FATF thresholds for the Travel Rule. This means:
    • For transfers between VASPs (VASP-to-VASP), the originating VASP must obtain and transmit required originator and beneficiary information for transactions equal to or exceeding USD/EUR 1,000 (or its equivalent in other currencies or virtual assets).
    • For transfers from an unhosted wallet to a VASP, or from a VASP to an unhosted wallet, VASPs are expected to obtain the necessary originator or beneficiary information as appropriate, often through enhanced due diligence.
    • Suspicious Transaction Reports (STRs): Regardless of any threshold, any transaction deemed suspicious must be reported to the UAF.

• Which VASPs Are Covered:

  • UAF Circular N° 79 defines "Proveedores de Servicios de Activos Virtuales" (PSAVs) as obliged entities. This definition is broad and covers entities that, as a business, perform one or more of the following activities for or on behalf of another natural or legal person:
    • Exchange between virtual assets and fiat currencies.
    • Exchange between one or more forms of virtual assets.
    • Transfer of virtual assets.
    • Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets.
    • Participation in and provision of financial services related to an issuer's offer and/or sale of a virtual asset.
  • This effectively covers most types of cryptocurrency exchanges, custodians, wallet providers facilitating transfers, and other entities involved in virtual asset services.

• Technical Implementation Requirements:

  • UAF Circular N° 79 mandates that PSAVs must establish and implement systems, policies, and procedures to prevent and detect money laundering and terrorist financing.
  • Regarding the Travel Rule specifically, PSAVs must be able to collect, verify, store, and transmit the required originator and beneficiary information to counterparty VASPs.
  • While the circular does not specify a particular technical solution (e.g., TRISA, Shyft Network, etc.), it requires the capability to:
    • Identify the originator of a virtual asset transfer and the beneficiary (name, physical address, national identity number or customer identification number, date and place of birth).
    • Identify the physical address or other unique identifier of the beneficiary and originator (e.g., wallet address).
    • Store this information securely and be able to provide it to competent authorities upon request.
    • Transmit this information to the beneficiary VASP immediately and securely.
  • PSAVs must develop risk-based approaches to determine the level of due diligence required and establish communication channels for information sharing with other VASPs.

• Penalties for Non-Compliance:

  • Non-compliance with AML/CFT obligations, including the Travel Rule as outlined in UAF Circular N° 79, falls under the scope of Law N° 19.913, which establishes the UAF and modifies various provisions relating to money laundering.
  • The UAF has the power to impose administrative sanctions, which can include:
    • Fines: Significant monetary penalties that can vary depending on the severity and recurrence of the infraction, potentially reaching thousands of UTM (Unidad Tributaria Mensual - Monthly Tax Unit).
    • Revocation of operating licenses or permits: In serious or repeated cases.
    • Public reprimands.
  • Furthermore, severe cases of money laundering or terrorist financing activities, or intentional failure to report suspicious transactions, can lead to criminal charges with imprisonment.

References and URLs:

1. UAF Circular N° 79 (Instrucciones para los Proveedores de Servicios de Activos Virtuales - PSAVs):

   • https://www.uaf.cl/portal/documentos/documentacion-tecnica-psav/circular-n-79-e-instrucciones-para-los-psav.html
   • (Note: The actual PDF link for Circular N° 79 is usually found within this page, often titled "Circular N° 79 – Imparte instrucciones a los Proveedores de Servicios de Activos Virtuales – PSAVs")

2. FATF Mutual Evaluation Report (MER) Follow-Up Reports for Chile (relevant for updates on Recommendation 15):

   • While the initial MER was in 2021, the follow-up reports show progress. Search for "Chile FATF Follow-Up Report" on the FATF website. The 2023 follow-up report reflects the upgrade in R.15 compliance.
   • https://www.fatf-gafi.org/countries-jurisdictions/countries/chile/ (Check the "Documents" section for specific follow-up reports).

3. Ley N° 19.913 (Establece la Unidad de Análisis Financiero y Modifica Diversas Disposiciones en Materia de Lavado y Blanqueo de Activos):

   • https://www.bcn.cl/leychile/navegar?idNorma=217316

In summary, Chile has implemented the FATF Travel Rule for VASPs, requiring them to comply with the collection, storage, and transmission of originator and beneficiary information for virtual asset transfers above the specified thresholds, backed by a robust AML/CFT framework and penalties for non-compliance.