Timor-Leste -- Travel Rule Implementation Regulatory Overview

Based on the most recent publicly available information, particularly the Asia/Pacific Group on Money Laundering (APG) Mutual Evaluation Report (MER) of Timor-Leste, the country has not yet fully implemented or adopted specific legislation and regulations to cover Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs) under its Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) framework.

Consequently, the FATF Travel Rule, as it applies to VASPs, is not yet operational in Timor-Leste.

Here's a breakdown of the status:

• Whether adopted:

  • No. Timor-Leste has not yet adopted specific legislation to regulate VASPs or to implement the FATF Travel Rule for virtual assets. The APG MER for Timor-Leste (adopted July 2021) identified significant gaps in this area. It noted that virtual assets and VASPs were not defined or covered by the existing AML/CFT legal framework. Recommendation 15 (New Technologies) and Recommendation 16 (Wire Transfers, extended to VA transfers) were rated as Non-Compliant (NC) for VASPs due to the absence of the necessary legal and regulatory framework.
  • While Timor-Leste has a foundational AML/CFT law (e.g., Law No. 7/2011 on Prevention and Combating of Money Laundering and Financing of Terrorism), it does not extend to virtual assets or VASPs.

• Effective Date:

  • N/A. Since the framework has not been adopted, there is no effective date for the Travel Rule concerning VASPs in Timor-Leste.

• Threshold Amounts:

  • N/A for VASPs. Because VASPs are not regulated, there are no specific threshold amounts established for them under an AML/CFT context for the Travel Rule. For traditional financial institutions, Timor-Leste's AML framework would apply thresholds for wire transfers as per FATF Recommendation 16 (e.g., EUR 1,000 for full originator/beneficiary information), but this does not currently extend to virtual assets.

• Which VASPs are covered:

  • None, explicitly. VASPs are not currently defined or subject to AML/CFT obligations in Timor-Leste's legal framework. This means that entities that would typically be considered VASPs (e.g., exchanges, custodians) are not regulated for AML/CFT purposes, and thus the Travel Rule does not apply to them.

• Technical Implementation Requirements:

  • N/A. As there is no legal requirement for VASPs to implement the Travel Rule, there are no technical implementation standards or requirements in place.

• Penalties for Non-Compliance:

  • N/A for VASPs regarding the Travel Rule. Since VASPs are not regulated under the AML/CFT framework, there are no specific penalties for their non-compliance with the Travel Rule. Penalties would apply to traditional financial institutions for failures related to traditional wire transfers under the existing AML/CFT law.

References:

• APG Mutual Evaluation Report of Timor-Leste (adopted July 2021):

  • This is the primary source of information regarding Timor-Leste's compliance with FATF Recommendations, including those related to virtual assets and VASPs. The report explicitly details the deficiencies in regulating VASPs.
  • URL: https://www.apgml.org/documents/details.aspx?doc=667
  • Relevant sections to check within the report would be Technical Compliance Ratings for Recommendation 15 (New Technologies) and Recommendation 16 (Wire Transfers) and the detailed analysis for these recommendations.

• Banco Central de Timor-Leste (BCTL):

  • The BCTL is the primary regulatory authority for financial services in Timor-Leste and would be responsible for issuing any future regulations concerning VASPs. Their official website is the place to monitor for updates.
  • URL: https://www.bancocentral.tl/

Conclusion:

Timor-Leste is in the early stages of addressing virtual assets within its AML/CFT framework. As of the last APG evaluation, the Travel Rule for VASPs has not been adopted or implemented due to the broader absence of specific VASP regulation. This represents a significant gap that Timor-Leste is expected to address in future legislative and regulatory reforms.