Anti-money laundering/counter-terrorism financing. Sometimes written as AML/CTF.
A Beneficial Owner is a natural person(s) who ultimately owns or controls a legal person and/or the natural person on whose behalf a transaction is conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement. References to "ultimately owns or controls" and "ultimate effective control" refer to situations in which ownership/control is exercised through a chain of ownership or by means of indirect control.
A Beneficiary Customer is a customer who receives a virtual asset transfer from the Originator Customer.
A Beneficiary VASP receives a transfer of a virtual asset from the Originator VASP directly or through an intermediary VASP and makes the funds available to the Beneficiary Customer.
A Counterparty VASP is a VASP on the opposite side of a Travel Rule data transfer.
A custodial wallet is a crypto wallet for which a third party holds the private keys.
A "decision" is binding on those to whom it is addressed (e.g. an EU country or an individual company) and is directly applicable.
A "directive" is a legislative act that sets out a goal that all EU countries must achieve. However, it is up to the individual countries to devise their own laws on how to reach these goals.
EDD is the process of gathering further data and information about the customer and applying additional due diligence measures to mitigate the risks arising from the relationship with the client.
The FATF Recommendations set out a comprehensive and consistent framework of measures that countries should implement to combat money laundering, terrorist financing, and the financing of weapons of mass destruction.
Notabene's shorthand version for FATF's Public Consultation: Draft Updated Guidance for a Risk-Based Approach to Virtual Assets (VAs) and VASPs Original document: https://www.fatf-gafi.org/media/fatf/documents/recommendations/March%202021%20-%20VA%20Guidance%20update%20-%20Sixth%20draft%20-%20Public%20consultation.pdf
Notabene's shorthand version for FATF's 12-Month Review: Revised FATF Standards on VAs and VASPs Published June 2020 Original document - https://www.fatf-gafi.org/media/fatf/documents/recommendations/12-Month-Review-Revised-FATF-Standards-Virtual-Assets-VASPS.pdf
Notabene's shorthand version of FATF's Guidance for a Risk-Based Approach to Virtual Assets (VAs) and Virtual Asset Service Providers (VASPs) Released June 2019 Original document: https://www.fatf-gafi.org/media/fatf/documents/recommendations/RBA-VA-VASPs.pdf
An additional note relating to or providing an interpretation of a FATF Recommendation
Notabene's shorthand version of FATF's Second 12-Month Review: Revised FATF Standards on VAs and VASPs. Released June 2021 Original document: https://www.fatf-gafi.org/media/fatf/documents/recommendations/Second-12-Month-Review-Revised-FATF-Standards-Virtual-Assets-VASPS.pdf
Notabene's shorthand version for FATF's Updated Guidance for a Risk-Based Approach to VAs and VASPs, released in October 2021. Original document - https://www.fatf-gafi.org/media/fatf/documents/recommendations/Updated-Guidance-VA-VASP.pdf
Financial Action Task Force (FATF) is an inter-governmental global money laundering and terrorist financing watchdog that sets international standards to prevent illegal activities.
A financial institution (FI) is a company engaged in dealing with financial and monetary transactions such as deposits, loans, investments, and currency exchange.
Intermediary VASP refers to a VASP in a serial chain that receives and retransmits a virtual asset transfer on behalf of the Originator VASP and the Beneficiary VASP or another Intermediary VASP.
A crypto wallet in which users have complete control over their funds and the associated private key. A non-custodial wallet is also referred to as an "unhosted wallet" throughout the text.
An "opinion" is an instrument that allows the institutions to make a statement in a non-binding fashion, in other words without imposing any legal obligation on those to whom it is addressed. An opinion is not binding. While laws are being made, the committees give opinions from their specific regional or economic and social viewpoint.
A customer that sends a virtual asset transfer from the Originator VASP.
A VASP that initiates the transfer of a virtual asset on behalf of an Originator Customer.
Personally identifiable information (PII) is information related to confirming an individual's identity. Sensitive PII can include full name, Social Security number, driver's license, financial information, and medical records.
A protocol is a set of rules that governs the communications between computers on a network. These rules include guidelines that regulate the following characteristics of a network: access method, allowed physical topologies, types of cabling, and data transfer speed.
A protocol switch enables interaction and communication with other protocols. Regarding the Travel Rule, Notabene defines a "Travel Rule messaging protocol switch" as a mechanism that examines incoming Travel Rule messages to see which protocol is the intended recipient and then directly (and only) passes the messages to that protocol.
A FATF "recommendation" is not binding. FATF recommendations allow the institution to make their views known and to suggest a line of action without imposing any legal obligation on those to whom it is addressed.
A "regulation" is a binding legislative act. It must be applied in its entirety across the EU.
The RBA is an approach in which a financial institution or crypto company identifies the highest compliance risks to its organization and sets up a process to assess, monitor, manage, and mitigate money laundering and terrorist financing risks to prioritize controls, policies, and procedures going forward.
The Travel Rule is the application of the FATF's Recommendation 16 to VASPs and consists of the obligation to obtain, hold, and transmit required originator and beneficiary information, immediately and securely, when conducting VA transfers.
Travel Rule data transfer refers to a transfer of PII about the Originator and Beneficiary Customers (name, account number, etc.) that must be sent from the Originator VASP to the Beneficiary VASP alongside or before a virtual asset transfer.
A UBO is the person who is the ultimate beneficiary when an institution initiates a transaction.
According to the FATF, a VA is a digital representation of value that can be traded or transferred and used for payment or investment purposes. We also refer to VAs as "crypto" throughout this document.
VASP is a term introduced by the FATF referring to any natural or legal person who is not covered elsewhere under the FATF Recommendations and as a business conducts one or more of the following activities or operations for or on behalf of another natural or legal person: i. exchange between VAs and fiat currencies; ii. exchange between one or more forms of VAs; iii. transfer of VAs; iv. safekeeping and/or administration of VAs or instruments enabling control over VAs; and v. participation in and provision of financial services related to an issuer's offer and/or sale of a VA.
In the context of virtual assets, FATF defines a transfer as a means to conduct a transaction on behalf of another natural or legal person that moves a virtual asset from one virtual asset address or account to another. Throughout this document, we also refer to virtual asset transfers as "blockchain transactions."