15 Dec 2020

SelfKey's Compliance Hub Solution: Key Benefits for VASPs

SelfKey’s new Compliance Hub provides a straightforward and efficient end-to-end solution for Virtual Asset Service Providers (VASPs) to comply with the FATF’s Recommendation 16: the so-called ‘Travel Rule’. 

Since the FATF expanded its Travel Rule recommendation to apply to VASPs in June 2019, stakeholders crypto and broader virtual asset space have faced a clear decision: adapt and become compliant, or risk falling under the regulatory axe. 

Under the new rules, VASPs are required, just like other financial institutions, to share the identity credentials of any users involved in asset transfers valuing $1,000 or more. This information is required to ‘Travel’ with the transaction, thus making it easier for regulators to keep track of potential money laundering or other criminal activity. 

While regulators have so far allowed for a certain degree of leniency in giving VASPs and the crypto industry time to adapt to the new regulations, it is not a question of if, but when the enforcement of rules will become more strict for VASPs. 

However, the challenges many VASPs face in becoming compliant can be complex. 

As well as having to share customer data with other VASPs or authorities when a transaction occurs on their network, VASPs also need to perform a number of other duties. 

Ongoing transaction monitoring is one of them, and involves VASPs being able to determine what a typical transaction looks like for each user, so that it can be used as a benchmark for identifying any variations or outliers that might indicate something suspicious is going on. Ongoing transaction monitoring forms a key component of any robust Anti-Money Laundering (AML) and Counter Terrorist Financing (CTF) strategy.

Another important activity VASPs now need to ensure they are undertaking is screening of customer wallets. This involves checking wallet custodians’ identities against blacklists, and communicating the presence of wallet owners on blacklists with other VASPs and relevant stakeholders. 

VASPs also need to be licensed and/or registered in their jurisdiction

What this all adds up to is a challenging situation for an industry that was built on the idea of decentralization and anonymity. However, that decentralization and ingenuity is also proving to be part of the solution, as innovative projects spring up to tackle the problem with new technological solutions.

SelfKey’s Compliance Hub is one such solution.

With the SelfKey Compliance Hub, VASPs can now easily comply with the Travel Rule through the integration of the Hub on their own APIs and networks. This constitutes an effective technical and legal solution to help VASPs stay compliant and grow their business without the threat of regulatory sanctions. 

These are some of the benefits offered by the SelfKey Compliance Hub Solution:

  1. Validate any transaction request to determine if Travel Rule compliance is required. This is a check to prove if a withdrawal request is to a personal or a custodial wallet.
  2. Using SelfKey’s architecture, user identity data is assigned a decentralized identity key (DID) and stored in Claims documents. The SelfKey registers contain both the DIDs and a hash to these Claims documents.
  3. By using DIDs, user data that is sent can be signed so the beneficiary VASP can validate the source is secure and legit.
  4. A secure messaging system transmits the necessary information to comply with the Travel Rule.
  5. Support for multiple protocols and standards are available, interoperability provides future-proofing and peace of mind.
  6. SelfKey’s Compliance Hub is a complete end-to-end solution, providing a frontend for users to make transaction requests and a backend dashboard for VASPs to automatically manage approvals.
  7. Our solution determines if compliance is required for each transaction and collects the necessary personable identity data, packages and transmits it securely.

We view the expansion of the Travel Rule to include VASPs as an important step in bringing the crypto industry into the mainstream, ensuring that crypto is not exploited by criminals for money laundering and other criminal activities. 

This regulatory evolution has opened up a clear path for this exciting, revolutionary way of conducting finance to take hold among larger parts of the global population, and SelfKey is proud to be at the forefront of developing new solutions to make this possible. 

 

Have any questions on how it works? Feel free to get in contact with us at any time, or to book your SelfKey Compliance Hub Demo now

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