In previous articles in this series, we covered the FATF’s stance on the timing of Travel Rule compliance and shared the critical decision-making points for regulated transactions. We also discussed how the crypto industry struggles with carrying out these steps before the blockchain transaction occurs. SafeTransact, Notabene’s pre-transaction decision-making platform, simplifies this process.
Applying FATF's rules can affect a whole business, as setting up a Travel Rule compliance program will affect many departments and stakeholders. Notabene’s long-standing goal has been to simplify this process, providing a way for VASPs to get started on their Travel Rule compliance journey with minimal effort from their teams. First, let’s revisit the steps that Travel Rule-compliant companies must follow before authorizing compliant crypto transactions on the blockchain:
These pre-transaction steps include:
- Identifying and sanction screening the transaction counterparty
- Performing due diligence and assessing risk on the counterparty VASP
- Exchanging Travel Rule information according to FATF's rules
Despite FATF's recent clarification that these steps must be followed before the transaction, results from our 2023 State of Crypto Travel Rule Compliance revealed that nearly 40% of compliant VASPs do not fulfill their Travel Rule data transmission transmission obligations before the blockchain transaction occurs. With SafeTransact, Notabene is committed to improving this statistic while helping all companies identify illicit transactions before they occur.
SafeTransact: A Suite of Tools for Crypto Pre-Transaction Decision-Making
Notabene’s SafeTransact is the first platform that enables Compliance Officers to identify and stop high-risk activity before it occurs. The Notabene platform offers a secure, holistic view of crypto transactions, enabling our subscribers to:
- automate real-time decision-making
- perform counterparty sanctions screening
- identify self-hosted wallets, and
- complete the smooth rollout of global Travel Rule compliance in line with international regulations.
Below, we break down SafeTransact's four major components that help VASPs implement pre-transaction decision-making.
1. SafeConnect: Effortlessly Identify, and Screen Counterparties
SafeConnect assists in identifying and screening counterparties in the pre-transaction process, an essential step to safeguard businesses from any potential legal repercussions resulting from transactions with sanctioned entities. Counterparty identification is notoriously challenging, as crypto transactions are usually linked only to a blockchain address.
By incorporating SafeConnect into your system, you can automatically and dynamically gather counterparty identification information from multiple sources; we use a combination of blockchain analytics data, data generated from client activity, and direct inquiries from your customer. This ensures accurate identification and consideration of jurisdictional requirements like thresholds and PII specifications, which can affect compliance workflows.
The Travel Rule compliance solution employs a multi-jurisdictional approach, automatically detecting specific requirements in our client’s jurisdiction, as well as their transaction counterparty’s jurisdiction. The plug-and-play functionality automatically applies relevant regulatory requirements to all transactions. Our product team constantly monitors and updates the criteria in case of any changes so Compliance Officers don't have to.
Further, Notabene aids in counterparty VASP discovery through blockchain analytics and several other methods. VASPs in the Notabene Network can upload their hashed blockchain addresses to expedite mutual discoverability. This allows automatic identification when those addresses are involved in transactions. Additionally, the Notabene Network Discovery features enable VASPs to manage their internal address book.
Lastly, once the transaction counterparty and institution are identified, VASPs can perform risk assessments at the transaction level, which involves sanction screening the beneficiary and originator name, and assessing the blockchain address risk score, by connecting to analytics and screening providers in Notabene's marketplace.
2. Notabene Network: Enhanced VASP Due Diligence and Risk Assessment
Once the transaction counterparty has been checked against sanctions, the due diligence focus turns to the counterparty VASP to assess risk to ensure that the counterparty VASP is a trusted exchange with adequate security standards. In its "Targeted Update on Implementation of the FATF Standards," released in June 2023, the FATF clarified the due diligence responsibilities of VASPs; VASPs must perform due diligence on their counterparties, regardless of their compliance status or the regulatory environment in their jurisdiction.
The Notabene Network hosts the largest selection of VASP profiles equipped with real-time, third-party-verified data. As an added layer of compliance, companies can exchange industry-standard due diligence questionnaires for a more scalable approach to counterparty verification.
3. Notabene Dashboard: Streamlining Travel Rule Information Exchange
Based on the outcome of due diligence checks on transaction counterparty and institution, a Compliance Officer can decide whether to exchange Travel Rule information or block the transaction. The Notabene dashboard, a holistic transaction hub, compiles critical Travel Rule data, enabling easy access and review of all such transactions. Our one-stop-shop dashboard simplifies compliance management by making information more organized and manageable.
Notabene subscribers can manage incoming and outgoing data transfers, securely store their customer's data for record-keeping, and generate comprehensive reports from the same dashboard. Due to our multi-protocol approach, our clients can send encrypted Travel Rule data transfers to various VASPs, regardless of their compliance status or network protocol.
Further enhancing the service, the dashboard offers a comprehensive view of all transactions beyond the scope of Travel Rule requirements, providing Compliance Officers with a singular platform to demonstrate pre-transaction decision-making approaches to regulators. It functions as a comprehensive compliance center, allowing approval or rejection of both hosted and self-hosted wallet transfers and connecting those decisions to the blockchain authorization flow.
4. Rules Engine: Automating the entire process
Finally, automating these checks is vital to implementing a complete Travel Rule compliance workflow with minimal impact on transaction latency. Compliance Officers can use our Rules Engine to program and apply compliance controls with various criteria across all transactions.
Thanks to in-app automation, compliance checks, and Travel Rule decisions can be tied with transaction outcomes, allowing Notabene subscribers to control compliance roll-out and workflows from the UI. Our dashboard lets you connect your AML providers, manage your rules quickly, and prevent illicit transactions in real-time.
Conclusion
Notabene's SafeTransact platform is a clear-cut answer to the challenges of meeting the FATF's Travel Rule regulations. SafeTransact tackles the problem of companies not complying with their obligations pre-transaction—an issue for 40% of Travel Rule-compliant businesses. SafeTransact equips VASPs with the tools to assess risk quickly, share information, and perform critical checks, such as identifying and confirming transaction partners while keeping the fast pace of crypto transactions.
Beyond streamlining crypto regulatory compliances, SafeTransact supports the growth and health of the worldwide digital asset industry by allowing businesses to spot and stop high-risk activities quickly.
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