Crypto Travel Rule 101 Guide: Get Started with Compliance Today

1. What is the Financial Action Task Force (FATF) and what does it do?

The Financial Action Task Force (FATF) is an intergovernmental policy-making body that sets international standard. The global money laundering and terrorist financing watchdog added ‘virtual assets’ to their key issues.

This article dives into the FATF, and why the organization applied the Travel Rule to virtual assets.

2. Virtual Assets and VASPs (Virtual Asset Service Providers): What are they?

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The FATF established two new Glossary definitions in October 2018—"virtual asset" (VA) and "virtual asset service provider" (VASP). Since then, there has been some confusion regarding which groups qualify as VASPs. This article delves into the FATF's definition of VASPs and the types of organizations that fall under the term, and therefore subjected to the FATF's guidelines for virtual assets and VASPs.

3. What is the Crypto Travel Rule?

In June 2019, the Financial Action Task Force (FATF), the world's anti-money laundering and terrorism financing watchdog, stated that The Financial Crimes Enforcement Network (FinCEN)'s 1996 Bank Secrecy Act (BSA) Travel Rule extended to virtual assets (VAs) and VASPs.

Since the second half of 2019, several, including Germany, Singapore, Switzerland, Canada, the United States of America, South Africa, the Netherlands, and more, have implemented or introduced legislation that nearly identically duplicates the FATF's anti-money laundering compliance obligations.

This post dives into the Travel Rule for crypto assets, and what it requires VASPs to do.

4. What is the Sunrise Issue?

Like the sun, Travel Rule enforcement dates rise at different times worldwide. The “sunrise issue” refers to the period when the Travel Rule is not in full effect across jurisdictions, which causes various stages of implementation.

This post explains the “Sunrise Issue,” its negative impact on operations, and gives practical tips on how to take a proactive approach to mitigate those effects.

6. What is anti-money-laundering (AML) and how does it apply to Crypto?

To curb the financing of criminal activity, regulatory organizations have passed astringent anti-money laundering (AML) legislation that prohibits money laundering through cryptocurrency exchanges and custody services.

This article discusses cryptocurrency anti-money laundering initiatives and how Notabene's crypto compliance software enables businesses to address these novel frameworks.

7. What is Counter-Terrorism Financing (CTF), and how does it apply to Crypto?

In recent years, evidence suggests terrorist organizations are embracing cryptocurrency for fundraising and transferring funds, hindering anti-terrorism efforts. This page covers counter-terrorism financing (CTF), its requirements, its relevance to the Travel Rule, and how Notabene can help VASPs and financial institutions prevent trading with high-risk and sanctioned entities.

8. What is KYC in Crypto, and why do crypto exchanges require it?

Crypto companies are particularly exposed to unlawful criminal activity in an increasingly global economy. Know your customer (KYC) measures intend to safeguard financial institutions from fraud, corruption, money laundering, and terrorist funding. Crypto KYC intends the same outcomes for companies that custody virtual assets.

This post dives into crypto KYC practices and its benefits.

9. What are Travel Rule messaging protocols?

VASPs must be able to collaborate and exchange customer information on transactions over a specific level to comply with the FATF's Crypto Travel Rule fully. However, due to the public nature of blockchain transactions, there was previously no way to send or receive sensitive data concurrently with a transaction.

Since Recommendation 16, numerous companies and industry working groups have developed messaging protocols to exchange Travel Rule data.

This article introduces the nine Travel Rule messaging protocols currently available on the market and delves into crucial features such as integration complexity, benefits and downsides, and support for non-hosted wallets. Additionally, this article demonstrates how Notabene aids in implementing each protocol.

10. Travel Rule implementation by jurisdiction

Each jurisdiction has a different application of FATF’s Crypto Travel Rule, leading to industry-wide implementation gaps.

For example, some jurisdictions have set $3000 as the threshold that triggers Travel Rule obligations, while others have set the threshold at $0. VASPs in certain jurisdictions already have to comply with the Travel Rule, while others still have an ongoing grace period. 

This page dives into the four critical components of Travel Rule compliance that are being applied differently across jurisdictions and how Notabene can help VASPs comply, regardless of jurisdiction. 

11. Which VASPs are currently Travel Rule compliant?

VASPs navigating Travel Rule compliance want to know which counterparty VASPs are regulated, licensed, compliant, which are sending travel rule data transfers, and other imperative information.

Each page of Notabene’s VASP & Crypto Companies Travel Rule Directory is dynamically updated in real-time to reflect the regulatory and business state of a VASP. Their travel rule messaging protocol is listed (if available.) Additionally, VASPs can share information about their AML/CFT practices and data storage policies. 

Through the VASP directory, companies that do not yet have a Travel Rule solution in place can send compliant data transfers to Notabene customers.

12. The current state of Crypto Travel Rule enforcement [Jan 2022]

To explore the state of Crypto Travel Rule compliance across the crypto and financial services industries, we ran a survey to gauge global compliance readiness and better understand the primary pitfalls to compliance. Notabene surveyed 56 crypto businesses and financial institutions in October 2021. We produced the State of Crypto Travel Rule Compliance Report–an industry-first look at the latest state of enforcement by jurisdictions.

13. Six Reasons VASPs are considering Travel Rule solutions right now

As FATF recommends pausing business with non-compliant VASPS, Compliance Officers are currently considering end-to-end Travel Rule solutions to upkeep transaction volume and business relationships.

Read the six major reasons pushing VASPs to search for compliance solutions below.

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14. FATF's Final Guidance for Virtual Assets and VASPs [Webinar]

On 28 October 2021, the Financial Action Task Force (FATF) released its revised guidance for virtual assets, introducing new and updated requirements for the industry.

In this on-demand webinar, VASPnet's COO Niel Samtani sits down with Notabene's CEO Pelle Brændgaard, Patricia Risso - Global Head of Compliance at Bitso, and Siân Jones - Senior Partner at XReg Consulting to discuss the FATF’s new guidance and its impact on AML crypto regulatory compliance compliance.

15. Ten Interoperability Tips for VASPs

The Travel Rule presents a unique challenge for the cryptocurrency business, as blockchains aren't designed to communicate PII with a transaction. VASPs must develop communications protocols to securely share originator and beneficiary information to comply with FATF's Travel Rule Recommendation.

This post, created in partnership with Chainalysis, explains what interoperability means for the Travel Rule and how to choose a solution that operates across jurisdictions and VASPs.