31 Aug 2020

Travel Rule Compliance Challenges for VASPs

The FATF Travel Rule has raised a number of significant challenges for compliance. Those highlighted by the FATF recently in its review include:

  1. Dealing with VASPs that do not have a Travel Rule solution

    • There are two scenarios here whereby either the transaction is totally blocked or the transaction can still be sent, but without the user’s personal identity data.  The latter option would mean that the transaction is completed without Travel Rule compliance. It stands to reason that all non-compliant Travel Rule transactions are recorded in order to be made compliant once the beneficiary VASPs have a solution in place.

      2. Post facto submission and past transfers

    • Also following on point 1, FATF has received requests to find out to what extent batched data submissions for travel rule data is allowed under the new Standards. Specifically of interest to VASPs are whether data can be submitted on a post-facto basis (a certain number of days after) rather than an immediate transmittal data submission, as well as the onus on data collection from past transfers.

     3. Identifying counterparty VASPs

    • The FATF Review acknowledged that doing VASP counterparty due diligence quickly and securely remains a two-fold challenge. Not only must VASPs be able to identify whether they are transacting with another VASP rather than a private wallet, but they will also need to confirm whether their VASP counterparty is registered or licensed in its jurisdiction.

The FATF review has indicated that the roadmap for the next 12 months requires a set of clearer guidelines for solution providers to implement, especially in order for it to reach mass adoption. Cooperation between both VASPs and solution providers is also needed so that a network of interoperability can be established in which compliance can work. 

If you are interested to know more, take a deeper look at our Compliance Hub solution.

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