CipherTrace Announces Cryptocurrency Travel Rule Solution for Regulatory Compliance
FinCEN and FATF regulatory compliance solution that is compatible with the TRISA.io open standard has been released by CipherTrace
CipherTrace announces the release of “CipherTrace Traveler,” a cryptocurrency Travel Rule compliance solution for virtual asset service providers (VASPs), including cryptocurrency exchanges, custody providers, OTC trading desks, banks and other financial institutions that is compatible with the TRISA standards (“Travel Rule Information Sharing Alliance”).
The Financial Action Task Force (FATF) Recommendation 16, the “Travel Rule,” is a guideline created by the global anti-money laundering watchdog the Financial Action Task Force (FATF) to mitigate money laundering and other illegal financial activities. Under the FATF’s new Travel Rule guidelines, exchanges, banks, OTC desks, hosted wallets and other financial institutions are required to share certain personally identifying information (PII) about the recipient and receiver for cryptocurrency transactions over USD/EUR 1000 globally.
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The Travel Rule Information Sharing Alliance (TRISA.io) is a non-profit collaboration of 150 cryptocurrency stakeholders delivering critical security infrastructure and open-source software to address the FATF’s top concerns and help overcome the “sunrise issue.” Top concerns revolve around identification and due diligence on counterparties and add security. TRISA utilizes proven security components to address privacy and data protection issues.
TRISA collaborated with GDF to create the TRIXO questionnaire as a foundation for KYV. The purpose of this questionnaire is to act as a baseline due diligence for VASP to VASP onboarding ahead of Travel Rule data sharing.
“CipherTrace Traveler is the first major milestone in the progressive development of commercial Travel Rule solutions building upon TRISA’s open-source foundation,” said CipherTrace CEO Dave Jevans. “Traveler leverages the TRISA VASP directory and TRISA certificate authority developed by TRISA into a solution that will be more secure and interoperable for use by exchanges and other financial institution clients.”
Traveler will enable VASPs to automatically look up the name of a VASP that a transacting wallet belongs to, enabling assurance that they are only sharing PII with other Travel Rule-compliant VASPs. Traveler will scan addresses associated with incoming cryptocurrency transactions and automatically decipher the originating VASP, verify that the VASP is part of the TRISA directory, and share the PII necessary for Travel Rule compliance. Traveler prevents data leakage and assures confidentiality via its automated mutual VASP authentication system.
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“This is a major step in overcoming previous barriers prohibiting VASPs from complying with current and pending Travel Rule laws,” continued Dave Jevans. “If all major exchanges, banks, and other financial institutions deployed Traveler, money laundering using cryptocurrencies could be dramatically reduced, as criminals would have fewer avenues enabling the obfuscation of stolen funds.”
CipherTrace Traveler enables VASPs to comply with Travel Rule information sharing regulations by identifying hosted wallets and the recipient’s VASP. It leverages the open TRISA architecture for Know Your VASP (KYV) and mutual authentication to assure private information sharing and reducing the risk of leaked user data. CipherTrace Traveler integrates easily with transaction processing systems and interoperates with open-source TRISA.io software and protocols.
Jurisdictions around the world have and are proposing the implementation of laws based on the Travel Rule, potentially jeopardizing the future of virtual asset service providers should these institutions fail to adopt solutions. Already, Hong Kong, Singapore, and Switzerland forbid exchanges to operate without licenses that enforce Travel Rule compliance. Canada will require compliance by July 2021, and the United States is essentially already enforcing the Travel Rule under the Bank Secrecy Act (BSA).
The US Treasury Financial Crimes Enforcement Network (FinCEN)’s proposed rule change regarding the Travel Rule seeks to lower the threshold and clarify that the regulation definitely applies to virtual currency transactions. The proposed rule change intends to lower the existing dollar threshold to collect, retain, and transmit information on funds transfers and transmittals of funds in amounts of $3,000 or more to $250 for funds transfers and transmittals of funds that begin or end outside the United States. Travel Rule regulation applied to cryptocurrencies will help alleviate concern regarding illicit use cryptocurrencies that past and current US Treasury leadership have expressed in public. CipherTrace and TRISA separately provided feedback to FinCEN in November 2020 and anticipate imminent implementation.
“We can expect FinCEN in the U.S. to drop the threshold for cross-border transactions, implement rules pertaining to privacy coin transactions, and set a new deadline for VASPs to comply all very early in 2021,” said Dave Jevans. “The time for US VASPs to sort out Travel Rule compliance is now.”
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