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Notabene Answers the FATF’s Travel Rule Solution Consideration Questions

Catarina Veloso
Catarina Veloso
July 15, 2022
Catarina, Regulatory & Compliance Senior Associate at Notabene, specializes in global crypto regulations. With roles including co-chair of the CryptoUK Travel Rule group and part of the EBA Expert Group, she shapes Travel Rule compliance. Holds Masters in Energy Law and BA in Law.
Table of Contents
Summary

Three years after The Financial Action Task Force (FATF) released its original guidance on virtual assets, it published a ‘Targeted Update on Implementation of FATF’s Standards on Virtual Assets (VAs) and Virtual Assets Service Providers (VASPs).’ The new report includes an overview of areas in which countries and the sector have progressed and ongoing implementation concerns. Check out our four key findings from the FATF’s Targeted Update on Implementation. 

At the end of the report, the FATF published a non-exhaustive list of questions that two leading jurisdictions reported useful in dialogue to foster the functional improvement of solutions (page 26, Box 1.) We answer these questions below. 

FATF's Targeted Update on Implementation of FATF’s Standards on Virtual Assets (VAs) and Virtual Assets Service Providers (VASPs), page 28.

Interoperability with other Travel Rule solution tools

1. Is the tool/solution interoperable with other tools?

Yes. Notabene is a protocol-agnostic Travel Rule solution. One of the differences between what we do and what a protocol does is that we primarily provide a software as a service (SaaS) solution to VASPs and Financial Institutions (FI) for implementing and operationalizing the Travel Rule. 

We believe that ultimately the industry needs a Travel Rule messaging protocol open to all VASPs or interoperability between a few that allows VASPs maximum reachability. In the absence of that today, we have built a universal Travel Rule protocol gateway. 

As we work on integrating with every live Travel Rule protocol, our protocol gateway ensures that our customers can reach the most expansive network of counterparty VASPs through our platform. In addition, Notabene offers an interoperability model for VASPs that are: 

  • Not yet live with any Travel Rule solution, or 
  • Using a protocol that is not yet integrated with Notabene. 

Our free Sunrise plan allows VASPs to receive and manage Travel Rule transfers from Notabene customers using our all-in-one dashboard. 

2. What kind of interoperability is embedded within your tool, and when will interoperability testing be conducted?

E.g. pilot test, functional test, capacity stress test, live data test, tested data scope, and tested VASPs. 

At Notabene, we aim to provide a solution that enables our customers to reach any VASP using any Travel Rule solution worldwide. This starts by using industry standards like IVMS101 for the messaging structure and a willingness to integrate with other solutions/protocols that go live. Additionally, we support various encryption standards, which are imperative to being protocol agnostic.

Our agile development team ensures that our back-end can communicate with other solutions in a way that requires the least amount of development work by our customers. Our customers deploy the enclave servers, set up end-points and certificates, etc. On the other hand, Notabene securely handles the data collection, VASP identification, and sending of the Travel Rule data transfer through those means.

3. What kind of interoperability testing has been conducted? E.g., pilot test, functional test, capacity stress test, live data test, tested data scope, and tested VASPs. 

Currently, we support TRP and OpenVASP and are in late discussion with providers like VerifyVASP, TRUST, and others about adding support. We are active in various technical and standards working groups where protocol interoperability is evaluated and will soon be conducted. 

Timing and scope of Travel Rule data submission 

4. Could the tool/solution enable VASPs to submit Travel Rule data for small value VA transfers (i.e., below USD1,000/EUR 1,000) to accommodate varying threshold requirements across jurisdictions? 

Yes. Notabene reflects the requirements implemented across jurisdictions in terms of applicable thresholds and scope of required Originator and Beneficiary information in Travel Rule transaction flows. Also, per FATF requirements, the Notabene tool allows VASPs to collect counterparty information for every transaction, regardless of the threshold, and store it for data-collection purposes.

Notabene customers can:

  • Collect the required information about the Beneficiary.
  • Transmit all required Originator and Beneficiary information to the Counterparty VASP, considering the transaction amount and applicable threshold.
  • Optionally transmit further Originator and Beneficiary information if the Counterparty VASP’s jurisdiction requires it.

5. Does the tool/solution cover all VA types?

Yes. Notabene covers all virtual asset types, as long as it is possible to convert the VA value to FIAT value to enable the threshold validation. Our CoinGecko integration instantly verifies the exchange rate when a user begins a withdrawal request.

6. Does it enable receiving VASPs to obtain and handle a reasonably large volume of transactions from multiple destinations in a secure and stable manner?

Yes. Processing Travel Rule transfers at scale is only possible through automation.

Notabene’s Rules Engine allows our customers to process outgoing/incoming Travel Rule transactions automatically based on several criteria, most relevantly:

  • Sanction screening results on Beneficiary/Originator counterparty.
  • The risk score of counterparty destination/origin wallet address according to blockchain analytics.
  • Trusted/non-trusted jurisdictions.
  • Trusted/non-trusted VASPs.

Notabene’s customers can also automate the beneficiary name matching process, i.e., cross-checking the beneficiary information received in a Travel Rule transfer and made available via webhook against internal know-your-customer (KYC) records. Our customers can also automate the wallet ownership check when transacting with unhosted wallets.

7. Does the tool/solution provide a function that allows an originator VASP to choose not to send Travel Rule data to a counterparty VASP?

Possible scenarios include the originator VASP needs to avoid providing financial services to certain sanctioned jurisdictions, high TF/PF risk areas, or lower levels of DPP regulation jurisdiction.

Yes. Our Rules Engine allows our customers to automatically cancel/reject any transactions going to/coming from non-trusted VASPs (e.g., due to sanctions or deficient data protection frameworks) or VASPs located in high-risk jurisdictions. Compliance Teams can also make an ad-hoc assessment to determine whether or not a Travel Rule data transfer should go through. In addition, the funds can then be automatically blocked from being sent to the Beneficiary. 

Click here to read what Notabene customers can do today to block transactions to sanctioned individuals.

Recordkeeping and transaction monitoring

8. What function does the tool/solution provide to facilitate recordkeeping and transaction monitoring (retaining data for 5 years/ allow user VASPs to download data)?

An overview of Notabene’s approach to recordkeeping and transaction monitoring:

  • Our customers receive a copy of the entire Travel Rule payload when it is created and with every status update through a webhook. Additionally, we retain a copy of the records for as long as they are a customer or as long as their jurisdiction allows. If our solution is no longer required to retain a copy, customers can download a full copy of their Travel Rule payload into CSV. 
  • The Notabene dashboard also includes Travel Rule performance metrics, allowing the VASP to track several key data points (such as the rate of non-custodial transactions, rate of accepted and rejected transactions, time to response, etc.). We will roll out additional data analytics tools in the coming months to support further reporting.
  • VASPs can import Travel Rule data into transaction monitoring and market surveillance systems. The reverse also applies: transaction risk data can be imported to Notabene to support better Travel Rule data flows.


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