The Travel Rule
What Product Teams Need to Know When Money Starts Moving
Learn what the travel rule requires, when it applies to payouts and transfers, and how strong data architecture helps teams meet global compliance expectations.
Most companies begin by collecting payments…but once they start sending money out to other accounts, the rules change. NBFIs, fintech platforms, and digital asset businesses that enable payouts or transfers step into a space where travel rule compliance matters. “The travel rule” is widely misunderstood as a matter of border crossings, yet it actually governs the transmission of funds within financial systems generally. And it requires specific sender and receiver details to accompany qualifying transactions.
For product and engineering teams, that means building financial flow auditability into internal systems and supporting reliable metadata capture for each fund movement. But how do you go about building infrastructure that meets these requirements? And how do you know that you need to do them in the first place?
What the Travel Rule Actually Requires in the United States
The travel rule is intended to give regulators and financial institutions enough visibility to trace a transaction when a transfer looks unusual or risky. In the United States, this rule applies when a business is engaged in the transmittal of funds, which means moving money on behalf of someone else. This includes when moving digital assets between chains—a topic we will cover in detail in a separate blog post.
The travel rule kicks in when you are transmitting funds equal to or greater than 3,000 USD (or its foreign equivalent). To meet travel rule compliance, the originator’s financial institution must include and send a specific set of identifying details with the transmittal order. These fields include:
- the name of the transmittor
- the transmittor’s account number, if used
- the transmittor’s address
- the identity of the transmittor’s financial institution
- the amount of the transmittal order
- the execution date
- the identity of the recipient’s financial institution
If the institution has the information, it must also include:
- the name of the recipient
- the recipient’s address
- the recipient’s account number
- any other unique identifier for the recipient
These requirements exist so authorities can piece together a complete picture of a transaction chain without relying on guesses or fragmented data.
When the Travel Rule Applies to Product and Engineering Teams
Understanding whether your business falls under the travel rule often comes down to one question: Are you transmitting funds on behalf of someone else, or simply making ordinary commercial payments? Product and engineering teams enter travel rule territory when their systems begin to hold, route, or transfer customer money between parties, which is common in NBFIs, digital asset platforms, as well as marketplaces.
Teams sometimes discover travel rule obligations late in the process. A product feature that begins as a convenience, such as letting users hold funds or transfer value between accounts, can shift a company into the category of a money transmitter. Once that shift occurs, regulators expect consistent travel rule compliance, even if the underlying services are spread across multiple tools.
Regulators also expect that every qualifying transfer can be traced back to a clear sender and a clear recipient. This is where financial flow auditability becomes essential. It is not enough to track that a certain amount left an account. You need a reliable record of who initiated the transfer, who received it, which instrument or rail carried it, and what identity information is associated with both sides of the flow.
And its not just regulators who are interested. Many counterparties won’t accept a transfer until you can prove that you have met the travel rule requirements in their jurisdiction. Often, this will introduce unexpected latencies in transfers as the counterparty is able to verify that you are compliant.
The Challenge of Complying with the Travel Rule
The practical challenge is that most companies do not start with these capabilities. Early versions of payout systems or internal wallets often track balances but not people. Identity data, if it exists, might live in a KYC service, customer metadata in a CRM, and transaction details in a payment processor. None of these tools link their data by default, which makes it challenging to assemble the transmittal of funds data that captures metadata after the fact.
Moreover, the travel rule is not just a US regulation. And, because jurisdictional rules differ, the burden on businesses operating across borders increases. A flow that is exempt in one region may qualify in another, so engineering teams need systems that capture the correct data for all regions without relying on manual work. Moreover, each jurisdiction has its own technical reporting requirements and data formats that they accept.
For example, in Europe, the travel rule is implemented through the Transfer of Funds Regulation (TFR). It requires full originator and beneficiary details to accompany qualifying transfers. It also explicitly extends these requirements to digital asset service providers, with specific expectations for how missing or incomplete information is detected and handled.
China takes a different route. Rather than a standalone “travel rule” label, it has been tightening its anti–money laundering framework around beneficial ownership and customer due diligence. New Beneficial Owner Information (BOI) Measures require most entities to file detailed beneficial owner data that financial institutions can use for AML and CTF checks. At the same time, banks are still expected to identify beneficial owners as part of ongoing customer due diligence.
The complexity of all these different rules can feel overwhelming. Yet the global landscape points to a single common requirement: Regulators expect identity and transaction data to reside in a single place. Meeting that expectation is hard when KYC tools, payment processors, and ledgers all operate independently. Companies need systems that tie identity, account structure, and financial transactions into a single, coherent record.
Building a Foundation for Travel Rule Compliance
To meet travel rule expectations, companies need a set of operational and compliance controls that work together:
- KYC and KYB verification. You must be able to identify both originators and beneficiaries with reliable, up-to-date customer data.
- Sanctions and watchlist screening. Names and identifiers must be screened before funds move, and results need clear handling procedures.
- Risk scoring and monitoring. Transfers involving incomplete, high-risk, or suspicious information require escalation paths and record-keeping.
- Accurate account and wallet structure. You need a clear mapping between users and the instruments they control so transfers can be attributed correctly.
- Policies for missing or incomplete information. Regulators expect written procedures defining how you pause, reject, or review transfers when required data is unavailable.
- End-to-end financial flow auditability. Identity, account relationships, and money movements must be traceable across your internal systems, not fragmented.
As companies expand into cross-chain transfers, payouts, wallets, cross-border flows, or embedded-finance features, the travel rule should become an essential part of the design conversation. With Formance, product and engineering teams can build an architecture that supports the reliable transmittal of funds data that captures metadata from day one. It is a foundation for financial flow auditability that reduces risk, improves visibility, and prepares teams for the deeper regulatory expectations that come with scale, including the more complex requirements emerging in crypto and virtual asset environments.
The details of the digital asset-specific travel rule landscape deserve their own discussion, and we will cover that in a follow-up piece. For now the takeaway is that when a business begins transmitting funds (be it fiat or digital), it enters a regulatory space where accuracy, traceability, and metadata matter. Building the right infrastructure early makes these obligations manageable, and Formance helps teams get there without slowing their roadmap.
