Guide

Crypto Travel Rule 101

We’ve collected our top articles to present crypto Compliance Officers with actionable advice and practical resources to navigate the world of crypto compliance.

The Crypto Travel Rule 101 Guide intends to answer general, fundamental questions concerning best practices for compliance with new FATF regulations. It is not meant to be comprehensive and does not replace or supersede the regulations. 

Our Crypto Travel Rule 101 guide covers:

 + much more.

Jump right in!

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.

Learn More about fatf

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


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.

Dive into 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.

LEARN THE INS AND OUTS OF THE CRYPTO TRAVEL RULE

4. 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.

learn more about aml in crypto

5. 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.

Learn more about kyc in crypto

6. 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.

learn more about travel rule messaging protocols

7. 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. 

Learn more

8. 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.

Browse Travel Rule compliant VASPs

9. 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.

Download the Report

10. 6 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.

LEARN MORE
FAQ

Crypto Travel Rule 101 Guide

What is the Crypto Travel Rule 101 Guide?

The Crypto Travel Rule 101 is a collection of articles to help Compliance Officers at crypto exchanges sort through the Financial Action Task Force (FATF) ’s Crypto Travel Rule.

The Crypto Travel Rule 101 guide features information around:
- The FATF,
- AML in crypto,
- KYC in Crypto,
- Travel Rule messaging protocols,
- The state of implementation by jurisdiction
+ and much more.

The Crypto Travel Rule 101 Guide addresses fundamental issues about best practices for complying with the new FATF standards. It is not intended to be exhaustive and does not intend to replace or supersede existing regulations.

Does cryptocurrency have rules and regulations?

Since 2018, the Financial Action Task Force’s) FATF has released a series of draft papers and working group reports aimed at defining VASPs and virtual assets and recommending how countries should implement regulations such as the “Crypto Travel Rule” for cryptocurrency.

Many jurisdictions worldwide, including the USA, Germany, Switzerland, Canada, South Africa, the Netherlands, Singapore, and others, have adopted the FATF’s recommendations for regulating cryptocurrency.

We’ve summarized Crypto Travel Rule regulations by jurisdiction on our Jurisdictions page.

What information is required for the Crypto Travel Rule?

FATF’s Updated Guidance [OCT 2021] states that the Originator and Beneficiary Customer information that the Originator VASP needs to obtain and transmit to the Beneficiary VASP and that the Beneficiary VASP, in turn, needs to receive is the following:

Originator Customer information:
1. Name
2. Account number (wallet address)
3. One of the following:
3.a Physical address
3.b National identity number 
3.c Customer identification number
3.d Date
3.e Place of birth

Beneficiary Customer information:
1. Name
2. Account number (wallet address)

How do you comply with the Crypto Travel Rule?

To comply with the FATF’s Crypto Travel Rule, VASPs must:
1. Establish counterparty wallet type, pre-transaction,
2. Apply jurisdictional-specific requirements,
3. Conduct a sanctions check on each counterparty,
4. Identify counterparty VASP
4.a Assess the risk score of an address (through blockchain analytics)
5. Conduct diligence on counterparty VASPs before allowing transactions with them
6. Store personally identifiable information (PII) of customers and beneficiaries in a GDPR-compliant way and for record-keeping / reporting purposes, and
7. Send and receive customer PII to and from VASP using various Travel Rule messaging protocols.

Virtual asset service providers (VASPs) will need a fully-integrated Travel Rule compliance solution to fulfill all seven critical requirements.

Is crypto regulated in any country?

Yes, countries such as the Netherlands, Germany, Switzerland, Canada, South Africa, the USA, Singapore, and others have adopted or introduced legislation that mirrors the Financial Action Task Force’s AML compliance obligations.