Sumsub’s compliance experts dive deep into Travel Rule requirements and typical implementation challenges, sharing actionable tips for VASPs
Miami — March 21, 2023 — Sumsub, a global tech company that provides customizable KYC, KYB, AML and transaction monitoring solutions, published its Complete Guide to the Crypto Travel Rule today.
The Complete Guide to the Crypto Travel Rule (2023) was prepared by Sumsub’s compliance team to provide an overview of the regulatory landscape regarding the Travel Rule. This guide is intended to help readers understand Travel Rule requirements and typical challenges in implementation. It offers insights on how Travel Rule regulations are developing worldwide and how to build the process of Travel Rule verification to ensure compliance. Sumsub’s experts have also prepared a checklist of things to take into account when choosing a Travel Rule solution.
The Travel Rule refers to FATF Recommendation 16 (wire transfers) in the VA (virtual assets) context. It requires crypto companies, collectively referred to as VASPs (virtual asset service providers), and financial institutions engaged in VA transfers to obtain “required and accurate originator information, and required beneficiary information” to share with counterparty VASPs or financial institutions during or before a transaction. Since the personal data of transacting parties ‘travels’ with their transfers, the regulation is dubbed the “Travel Rule.”
Aсcording to the most recent FATF report, 29 out of 98 responding jurisdictions reported having passed Travel Rule legislation, while just 11 have begun enforcement and supervisory measures. However, a further 25% of these jurisdictions are in the process of passing Travel Rule-related legislation.
If a business fails to comply with the Travel Rule, it could face country-specific local, regional or national regulatory sanctions. In Estonia, for instance, the penalty for a legal entity is a fine of up to 400,000 euros.
“This regulatory shift has jolted the crypto industry: businesses have had no clue how to implement this new FATF recommendation, because FATF does not prescribe anything specific and prefers the so-called functional and technology-neutral approach in its guidance. However, in the long term, we are sure that an optimal solution will be found, and then the implementation of the Travel Rule will become global and more or less unified, except, of course, for countries where cryptocurrencies and VASPs are banned. For example, we can find such regulatory efforts on the EU-level, including the draft amendment to the EU regulation ‘on information accompanying transfers of funds and certain crypto-assets,’ which, if adopted, will provide a pan-European standard for the Travel Rule,”explained Tony Petrov, Chief Legal Officer at Sumsub.
Prior to releasing this guide, Sumsub launched its Travel Rule solution for the crypto industry, offering a full compliance toolkit for the whole customer lifecycle. Sumsub’s Travel Rule solution covers all the necessary actions, including KYC/AML checks and counterparty VASP verification. The platform also provides a tool for transaction monitoring (KYT) which detects any suspicious activity in real time.
“The recent bank failures of SVB, Signature, and Silvergate—all of which service the crypto industry—have concerned the public. Flagstar’s acquisition of Signature notably excludes its crypto deposits. But crypto has little to do with the reasons these banks failed, or the reasons Credit Suisse failed, now taken over by rival UBS. The sad consequence of the situation will be that crypto businesses will have a tougher time finding a partner bank. While some critics are eager to blame crypto, questions should be asked about the leadership issues, lack of risk management and compliance procedures in these financial institutions,”added Petrov.
To learn more about the Crypto Travel Rule and download the guide for free, please visit: https://sumsub.com/guides-reports/complete-guide-to-the-crypto-travel-rule-2023/.