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.