Denmark -- Travel Rule Implementation Regulatory Overview

Denmark, as an EU Member State, has implemented the FATF Travel Rule for virtual assets primarily through the direct applicability of EU regulations and its national Anti-Money Laundering (AML) legislation.

Here's a breakdown of the status:

1. Whether Adopted

Adopted: Yes, the FATF Travel Rule for virtual assets has been adopted in Denmark through the EU's legislative framework, notably the revised Regulation (EU) 2023/1113 on information accompanying transfers of funds and certain crypto-assets (Transfer of Funds Regulation or TFR). This regulation directly applies to all EU member states, including Denmark, without needing separate national transposition for its core provisions.

Before the full applicability of TFR 2023/1113, Danish legislation (specifically the Hvidvaskloven) already placed AML/CTF obligations on Virtual Asset Service Providers (VASPs), laying the groundwork for Travel Rule compliance.

2. Effective Date

The Regulation (EU) 2023/1113 (TFR) entered into force on 29 June 2023 but applies from 30 December 2024. This is the key date for the full application of the Travel Rule requirements in Denmark.

3. Threshold Amounts

• For transfers between Crypto-Asset Service Providers (CASPs): The TFR mandates no de minimis threshold. This means that all transfers of virtual assets, regardless of value, between one CASP and another, must be accompanied by the required originator and beneficiary information.
• For transfers to or from unhosted wallets (self-hosted wallets):
  • When a CASP initiates a transfer of crypto-assets to an unhosted wallet, or receives crypto-assets from an unhosted wallet, and the amount exceeds EUR 1,000, the CASP must verify that the unhosted wallet is owned or controlled by the originator or beneficiary.
  • The obligation to collect and transmit originator and beneficiary information always applies, but the specific verification requirement for unhosted wallets kicks in above €1,000.

4. Which VASPs Are Covered

The TFR refers to Crypto-Asset Service Providers (CASPs), which is the EU's term for entities performing services related to crypto-assets that are subject to AML/CTF obligations. This definition is broad and covers entities previously known as Virtual Asset Service Providers (VASPs).

In Denmark, the Hvidvaskloven (AML Act) defines "virtual asset service providers" broadly to include:

• Exchanges between virtual assets and fiat currencies.
• Exchanges between one or more forms of virtual assets.
• Transfers of virtual assets.
• 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 virtual assets.

This covers entities such as:

• Cryptocurrency exchanges.
• Custodial wallet providers.
• Providers facilitating transfers of virtual assets on behalf of customers.

These entities are supervised by the Danish Financial Supervisory Authority (Finanstilsynet).

5. Technical Implementation Requirements

The TFR specifies the information that must be obtained and transmitted, rather than prescribing a specific technical solution or protocol.

Information to be collected and transmitted:

• For the originator:
  • Name
  • Wallet address (or account number where applicable)
  • Address (residential or registered office)
  • Official personal document number (e.g., passport, national ID) or customer identification number
  • Date and place of birth
• For the beneficiary:
  • Name
  • Wallet address (or account number where applicable)

CASPs are required to:

• Ensure that transfers of virtual assets are accompanied by this information.
• Verify the accuracy of the information, at least on the basis of documents, data or information obtained from a reliable and independent source.
• Retain the information for a period of five years.

For technical interoperability, CASPs are expected to adopt solutions (e.g., through industry-standard protocols like TRP, OpenVASP, Sygna, or other peer-to-peer solutions) that facilitate the secure and compliant transfer of this data between themselves. The Danish FSA has not, to date, mandated a specific technical protocol, leaving it to the industry to adopt effective solutions that meet the regulatory requirements.

6. Penalties for Non-Compliance

Penalties for non-compliance with AML/CTF obligations, including the Travel Rule, are set out in the Danish Hvidvaskloven (AML Act). Finanstilsynet is responsible for enforcing these rules.

Penalties can range significantly depending on the nature and severity of the breach, and whether it's a first offense or repeat violation. They include:

• Public reprimands and orders: Finanstilsynet can issue injunctions or public reprimands.
• Administrative fines: Significant fines can be imposed on the non-compliant entity. The AML Act allows for fines up to EUR 5 million (approximately DKK 37.5 million) or, in cases where the benefit derived from the breach can be determined, up to 10% of the undertaking's total annual turnover. For natural persons, fines can be up to EUR 5 million.
• Criminal charges: In severe cases, particularly involving deliberate breaches or repeated failures, individuals responsible within the VASP (e.g., management, board members) can face criminal prosecution, potentially leading to imprisonment.
• Withdrawal or suspension of registration/license: Finanstilsynet can revoke or suspend the VASP's registration, effectively prohibiting them from operating.

References and URLs:

• Regulation (EU) 2023/1113 (Transfer of Funds Regulation - TFR):

  • https://eur-lex.europa.eu/eli/reg/2023/1113/oj

• Danish AML Act (Hvidvaskloven): The latest consolidated version is typically available on Retsinformation.dk, the official Danish legal information portal. Search for "Lov om forebyggende foranstaltninger mod hvidvask og finansiering af terrorisme (hvidvaskloven)".

  • Example (may not be the absolute latest consolidated version, search Retsinformation for current): https://www.retsinformation.dk/eli/lta/2023/1529 (This is a specific amendment act from 2023, the main act would be earlier). The primary Act is typically Lov nr. 1022 af 29/06/2020, with subsequent amendments consolidated into it.

• Danish Financial Supervisory Authority (Finanstilsynet) - Information on Virtual Assets:

  • https://www.finanstilsynet.dk/Tilsyn/Tilsynsomraader/Hvidvask/Virksomheder_og_personer_med_kryptoaktiver (Danish page on AML supervision for crypto-asset businesses)
  • https://www.finanstilsynet.dk/ (Finanstilsynet main page)

It is crucial for CASPs operating in Denmark to stay updated on guidance from Finanstilsynet and industry best practices to ensure full compliance with the TFR and national AML requirements.