Sumsub and Mercuryo publish a guide for VASPs: “Mastering Travel Rule Compliance”

Rick Steves

“At Sumsub, we’ve concentrated our efforts on filling the gap in understanding the complexity of Travel Rule regulation and helping organizations find the best solution to stay safe and compliant while minimizing costs and avoiding potential risks of non-compliance. This guide we created with Mercuryo, our trusted partner, is the ultimate navigation tool all VASPs can consult.”

Sumsub and Mercuryo have together published a paper titled “Mastering Travel Rule Compliance” aimed at providing guidance to Virtual Asset Service Providers (VASPs).

Designed to aid cryptocurrency businesses in understanding and implementing the Travel Rule to ensure compliance and support business growth, the guide is particularly timely as the FATF’s recent survey revealed that 35 of 135 jurisdictions have already enacted Travel Rule legislation, with the European Union set to follow by December 30, 2024.

VASPs need to respond to the growing global commitment to integrating cryptocurrency within regulated financial systems and ensuring a safe, transparent, and compliant environment. The guide addresses the complexity of the regulation and provides practical solutions to stay compliant while minimizing costs and risks.

The Travel Rule, established by the Financial Action Task Force (FATF), mandates that financial entities involved in virtual asset transactions collect and share personal information of both senders and recipients. This regulation is a critical component of anti-money laundering (AML) and counter-terrorism financing (CTF) efforts. It is essential for VASPs and financial institutions to adhere to these guidelines to remain compliant, avoid penalties, and retain their licenses.

A guide to minimize costs and avoid potential risks of non-compliance with Travel Rule

Tony Petrov, Chief Legal Officer at Sumsub, said: “The Travel Rule plays a crucial role in promoting a secure and transparent environment within the cryptocurrency space, aligning it with broader financial regulatory objectives and efforts to combat financial crimes. It’s the global standard for ensuring secure VA transfers, and compliance with the Travel Rule is a reliable way to make the cryptocurrency industry transparent and safe for all. At Sumsub, we’ve concentrated our efforts on filling the gap in understanding the complexity of Travel Rule regulation and helping organizations find the best solution to stay safe and compliant while minimizing costs and avoiding potential risks of non-compliance. This guide we created with Mercuryo, our trusted partner, is the ultimate navigation tool all VASPs can consult.”

Andrew Ilinsky, Chief Product Officer at Mercuryo, commented: “Our long-term partnership with Sumsub combines joint core competencies and results in the all-encompassing guides for companies that we provide for free. As a global payments ecosystem, we’re building and harmonizing crypto and fiat solutions, which enable businesses across the globe to unlock and harness the power of crypto payments. This collaboration resonates deeply with Mercuryo’s mission of ensuring transaction safety, data security and compliance both for users and crypto platforms.”

Binance joined Global Travel Rule (GTR) Alliance

Earlier this week, Sumsub welcomed Binance to the Global Travel Rule (GTR) Alliance. The collaboration will grant access to a vast ecosystem of Virtual Asset Service Providers (VASPs), financial institutions, and fintech companies engaged in crypto transactions with Binance’s 183M+ users, facilitating secure transaction data validation.

This integration boosts Sumsub’s compliance solution for the crypto industry by enabling interoperability and addressing the sunrise issue, where counterparties may not be compliant with Travel Rule requirements due to the staggered adoption across different jurisdictions.

The sunrise issue in the context of cryptocurrency compliance refers to the challenge arising from the staggered implementation of these regulatory requirements across different jurisdictions and Virtual Asset Service Providers (VASPs). The term “sunrise” symbolizes the gradual onset or commencement of these regulations coming into effect at different times for different entities.

This issue creates a situation where some VASPs are required to comply with the Travel Rule, which mandates the collection and sharing of personal information for transactions above a certain threshold, while others are not yet obliged to do so due to their local regulations not having caught up.

This lack of uniformity leads to complexities in conducting transactions between VASPs that are at different stages of regulatory compliance, causing problems in the interoperability and smooth operation of global crypto transactions. The challenge lies in ensuring that all parties in a transaction are compliant, making the process of adhering to the Travel Rule more complicated than if a simultaneous, global implementation were in place.

Sumsub’s recent “State of Verification and Monitoring in the Crypto Industry 2023” report, based on analysis of over 800,000 fraud attempts and insights from the crypto sector, underscored the challenges of Travel Rule compliance and emerging fraud methods like AI-generated deepfakes.

Sumsub is renowned for its comprehensive verification platform, offering KYC, KYB, and other compliance solutions to over 2,000 clients across various industries, demonstrating its commitment to security and compliance in the rapidly evolving digital landscape.

Sumsub partnered with Chainalysis for Travel Rule solution

Sumsub also recently integrated with blockchain data platform Chainalysis in a move that significantly enhances the full-cycle verification provider’s capabilities when it comes to compliance in crypto markets. Leveraging Chainalysis’ extensive blockchain analytics platform and services, Sumsub’s Transaction Monitoring and Travel Rule solutions ensure regulatory compliance, secured data storage and automated crypto transaction monitoring for client companies.

Sumsub’s integration with Chainalysis and its Bring Your Own Key (BYOK) management model allows Sumsub to provide unified workflows and automated monitoring of transactions via a secure channel for the benefit of crypto businesses and their digital compliance needs. The partnership ensures that clients stay compliant as crypto regulations become more stringent and sophisticated.

The compliance solution mainly targets crypto exchanges, peer-to-peer marketplaces, and neobanks interacting with crypto for their customers. These firms now can set up automated crypto transaction monitoring and advanced analytics for deeper investigations and effective risk management in one unified dashboard.

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