Cabo Verde -- Travel Rule Implementation Regulatory Overview

Cabo Verde has adopted the FATF Travel Rule through specific legislation and regulatory instructions issued by the Banco de Cabo Verde (BCV).

Here's a breakdown:

1. Adoption and Effective Date

• Foundational Law: The legal framework for virtual assets (VAs) and Virtual Asset Service Providers (VASPs) in Cabo Verde was established by Decree-Law No. 5/2020 of January 27, 2020. This law defines VAs and VASPs, brings them under the supervision of the Banco de Cabo Verde (BCV), and subjects them to anti-money laundering and combating the financing of terrorism (AML/CFT) obligations.
  • URL (Decree-Law No. 5/2020): https://www.bcv.cv/pt/Legislacao/Documents/DL%20n%C2%BA%205_2020_27Jan.pdf (Portuguese)
• Travel Rule Implementation: The specific requirements for the FATF Travel Rule, including the collection and transmission of originator and beneficiary information, are detailed in Instruction No. 3/2021 of January 28, 2021, of the Banco de Cabo Verde. This instruction operationalizes the AML/CFT obligations for VASPs, including those related to the Travel Rule.
  • URL (Instruction No. 3/2021): https://www.bcv.cv/pt/Legislacao/Documents/Instru%C3%A7%C3%A3o%20n%C2%BA%203_2021.pdf (Portuguese)
• Effective Date: The Travel Rule provisions came into effect with Instruction No. 3/2021 on January 28, 2021.

2. Threshold Amounts

Instruction No. 3/2021, Article 16, aligns with FATF Recommendation 16 for Wire Transfers (extended to VAs). It generally requires the collection of originator and beneficiary information for all virtual asset transfers.

• Zero Threshold for Custodial Transfers: For transfers between VASPs (or from a VASP to a non-custodial wallet when initiated by a VASP customer), the full Travel Rule information is generally required for all transactions, regardless of amount.
• Threshold for Specific Data Points: While information is required for all transfers, certain detailed information requirements (e.g., full address of the originator/beneficiary) may have a threshold. Based on standard FATF implementation, this typically aligns with the EUR 1,000 (or equivalent) threshold. For transactions below this amount, VASPs might be allowed to collect less granular information, provided they can still identify the originator and beneficiary and reconstruct the transaction. However, the core obligation to obtain some identifying information remains for all transfers.

3. Which VASPs are Covered

Decree-Law No. 5/2020 defines VASPs comprehensively. Instruction No. 3/2021 applies to any entity authorized by the BCV to provide services related to virtual assets. This includes, but is not limited to:

• Exchanges between virtual assets and fiat currencies.
• Exchanges between one or more forms of virtual assets.
• Transfer of virtual assets (the core of the Travel Rule).
• Custody 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.

4. Technical Implementation Requirements

Instruction No. 3/2021, Article 16, mandates that VASPs must:

• Collect and Retain Information: Obtain and retain the required originator and beneficiary information for all virtual asset transfers.
• Transmit Information: Ensure that transfers of virtual assets are accompanied by the necessary originator and beneficiary information to the beneficiary VASP (or to the non-custodial wallet owner, if applicable).
• Secure Transmission: The information must be transmitted securely and reliably. The instruction does not prescribe a specific technical solution (e.g., TRISA, OpenVASP, SYGNA), but requires the capability and execution of transmitting this data.
• Verify Information: VASPs are expected to verify the accuracy of the originator and beneficiary information.
• Risk-Based Approach: VASPs must implement a risk-based approach to monitor transactions and report suspicious activities to the Financial Information Unit (FIU) of Cabo Verde.

5. Penalties for Non-Compliance

Decree-Law No. 5/2020 (Articles 21 to 24) outlines the general penalties for non-compliance with the virtual asset regulatory framework and AML/CFT obligations. These penalties are substantial and can include:

• Administrative Fines: Significant monetary penalties, which can vary depending on the severity and recurrence of the infraction.
• Temporary Suspension: Suspension of the VASP's authorization to operate for a specified period.
• Revocation of Authorization: Permanent revocation of the operating license for serious or repeated breaches.
• Criminal Charges: Depending on the nature of the non-compliance (e.g., involvement in money laundering or terrorist financing), individuals and legal entities could face criminal prosecution, imprisonment, and asset forfeiture, as defined by Cabo Verde's general AML/CFT laws (e.g., Law No. 37/VIII/2013 and its subsequent amendments).

In summary: Cabo Verde has a clear regulatory framework in place for virtual assets, including the implementation of the FATF Travel Rule, with specific instructions detailing the obligations for VASPs regarding information collection and transmission, backed by a range of administrative and potential criminal penalties for non-compliance.