Holy See -- Travel Rule Implementation Regulatory Overview

The Holy See, while not a direct member of the Financial Action Task Force (FATF), is a member of MONEYVAL, a FATF-style regional body. As such, it is committed to implementing the FATF Recommendations, including those related to virtual assets (VAs) and virtual asset service providers (VASPs), often referred to as the "Travel Rule."

Here's the status of the FATF Travel Rule implementation in the Holy See:

1. Whether Adopted

Yes, the Holy See has adopted legislative and regulatory measures to apply the FATF Recommendations to virtual assets (VAs) and virtual asset service providers (VASPs), including the "Travel Rule." This was confirmed by MONEYVAL in its Follow-up Report of December 2021, where the Holy See was found to have made significant progress in strengthening its AML/CFT framework.

Legal Basis:

• Law No. CCCLI (351) of 1 October 2020: This law made significant amendments to the Holy See's AML/CFT framework, introducing definitions for virtual assets and virtual asset service providers and extending AML/CFT obligations to them. This law brought the Holy See's legislation in line with FATF standards for virtual assets.
• Instruction No. 1 of the Financial Intelligence and Supervisory Authority (ASIF) of 19 March 2021 (Regulating VASPs): This instruction further details the obligations of VASPs operating in or from the Holy See, covering licensing, registration, customer due diligence, reporting, and information transfer requirements consistent with the Travel Rule.

2. Effective Date

The measures effectively became enforceable with the promulgation of Law No. CCCLI on 1 October 2020 and the subsequent ASIF Instruction No. 1 on 19 March 2021. MONEYVAL assessed these changes as being implemented by the time of its December 2021 Follow-up Report.

3. Threshold Amounts

Consistent with FATF Recommendation 16 as applied to virtual assets (the Travel Rule), there is no de minimis threshold for the collection and transmission of originator and beneficiary information for transfers between two VASPs.

• When a VASP conducts a VA transfer for an originator (or to a beneficiary), it must collect and transmit the required information, regardless of the value of the transaction.
• For transfers to or from an unhosted wallet (where only one VASP is involved), the FATF guidance generally suggests that VASPs should apply risk-based procedures to determine whether to collect more information, potentially with a threshold of €/$1,000. However, the primary "Travel Rule" requirement for VASP-to-VASP transfers applies regardless of value.

4. Which VASPs are Covered

The Holy See's legislation and ASIF's instructions cover entities providing services related to virtual assets, consistent with the FATF definition of a VASP. This includes, but is not limited to, entities that conduct:

• 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.

Given the Holy See's unique nature and small jurisdiction, the number of VASPs physically operating from there is likely very limited, but its legal framework is designed to cover any such activity should it arise or interact with its financial system.

5. Technical Implementation Requirements

Holy See legislation, like most national AML/CFT laws, does not mandate a specific technical solution for implementing the Travel Rule. Instead, it requires VASPs to have systems and procedures in place to:

• Collect the required originator and beneficiary information accurately.
• Store this information securely.
• Transmit this information securely and reliably to the beneficiary VASP (or make it available upon request).
• Screen for sanctions and suspicious activity.

VASPs operating under Holy See jurisdiction would be expected to adopt one of the emerging technical solutions (e.g., TRISA, Sygna, Travel Rule Protocol, etc.) or develop their own compliant system to facilitate the secure and compliant exchange of information with other VASPs globally.

6. Penalties for Non-Compliance

The Holy See's AML/CFT framework includes a range of administrative and criminal penalties for non-compliance. These can include:

• Administrative Sanctions: Fines imposed by ASIF, revocation or suspension of licenses, and other supervisory measures.
• Criminal Penalties: Imprisonment and significant monetary fines for serious violations, particularly those related to money laundering, terrorist financing, or other financial crimes. These are outlined in the Holy See's Criminal Code and specific AML/CFT laws.

ASIF has the authority to monitor compliance and impose sanctions for failures to adhere to the requirements set forth in Law No. CCCLI and its implementing instructions.

References:

• MONEYVAL Follow-up Report (December 2021) on the Holy See: This report details the progress made by the Holy See in addressing the deficiencies identified in its 2012 mutual evaluation report, including specific mentions of virtual assets and the Travel Rule.
  • Council of Europe MONEYVAL Reports - Holy See (Look for the "Follow-up Report, December 2021")
• ASIF (Autorità di Supervisione e Informazione Finanziaria) - Holy See: The official website of the Holy See's financial supervisory and intelligence authority, which publishes relevant legislation and guidance.
  • ASIF Official Website (Relevant legislation can usually be found under sections like "Normativa" or "Legislation").
  • Specific laws like Law No. CCCLI and ASIF Instruction No. 1 would be found here, though direct URLs to specific documents may change or require navigation.