FATF Travel Rule toolkit- For crypto businesses in Singapore

Prepared for you byThis FATF Travel Rule toolkit for crypto businesses inSingapore is prepared for you by CoolBitX and Elliptic.
We have partnered to help ﬁnancial service providers
respond swiftly to FATF's Travel Rule requirements byJune 2021 .

What is the FATF Travel Rule?
The Financial Action Task Force (FATF) is an intergovernmental organisation founded in 1989 on the initiative of the G7 todevelop policies to combat money laundering.
Recommendation 16's "Travel Rule" requires of Virtual Asset Service Providers (VASPs):
originators and beneﬁciaries of all transfers of digital funds must exchange identifying information. Simply put, theinformation about the parties involved in a transaction, must “travel” from the sender to the receiver.

June 2019

June 2020

June 2021

FATF announces
Recommendation 16 expansion
to include virtual assets

FATF ﬁrst 12-month review.
The FATF expects theindustry to comply globallywith the Travel Rule by June
2021, no exceptions.

FATF second 12-month review

Crypto regulatory development in Singapore

14 Jan 2019

5 Dec 201928 Jan 202016 Mar 2020

24 June 2020

21 Jul 2020

Singapore passes
the PaymentServices Act (PSA),
which deﬁnes
crypto as a "digital
payment token" andrequires service
providers to belicensed

MAS publishes
PSN02, which puts
in place AML
requirements forcrypto companies
in order to qualify
for licensing.

The PSA comes
into effect.Crypto
exchanges andbusinesses must
notify MAS andregister before 1Mar 2020.

MAS publishes
guidelines toclarify theAML/CFT
obligations ofﬁnancialinstitutions.

First logged
enforcement of
PSA against an
unlicensed
crypto seller.

MAS publishes aConsultation Paper
to align Singapore’s
regulation with theFATF Standards
and cover crypto
companies withoverseas activities.

So why do you need to adopt a
FATF Travel Rule solution now?

Beneﬁts in facing regulations

Demonstrate to regulators that yourbusiness is actively seeking to be compliant.
Position your company as a progressive
industry leader - you’re in good company withthe big players.
Be part of a VASP alliance that exerts
industry inﬂuence.

Progress in implementing VASP AML/CFT regulatory
regimes:●32 jurisdictions that the FATF surveyed have
imposed AML/CFT regulations on VASPs●
13 jurisdictions are developing regulations toapprove VASPs●3 jurisdictions have prohibited VASPs●2 jurisdictions are developing regulations toprohibit VASPs●
4 jurisdictions have yet to decideBeneﬁts for your customers

Build trust with your customers, give thempeace of mind because your operation iscompliant.
Institutional investors are waiting to joincompliant VASPs to help mitigate theirAML/CFT risk.
Fortify your business against the advances ofmoney launderers, terrorists and other badactors.

Beneﬁts for your team
Be proactive: Integrate a solution that best suits yourbusiness into your compliance workﬂows now, instead ofbeing forced to do so later.
Future-proof: The right solution provider will actively
engage regulators and industry groups, giving you expert
insights in not only current but incoming regulations as well.
Avoid implementation delays: There is no way around theTravel Rule, therefore it is better to act now before
implementation bottlenecks and costs spike as June 2021
draws near.

Avoid AML ﬁnes. According to ACFCS:●●In 2018, 29 AML ﬁnes of$4.27bn were imposed.
In 2019, 58 AML penalties
were handed down,
totaling $8.14bn.

So how do you evaluate
FATF Travel Rule solutions?

Here is a checklist for youConsideration

FactorTested❏

Has the solution demonstrated successful production tests of live data transfers by VASPs?

Industry-Standard Messaging❏

Does the solution implement the industry-approved interVASP messaging standard (IVMS101)?

Interoperability Roadmap❏

Has the provider indicated that they will pursue interoperability with other solutionsproviders?
Have they set out a target timetable and roadmap for achieving this?

❏Governance❏❏Has the solutions provider demonstrated a commitment to maintaining a sound governancemodel?
Is the governance model transparent?

FactorConsideration

Data Privacy and Security❏❏

Does the solution maintain customer privacy and is the data transferred in a secure way?
Is the provider working to ensure its solution is compliant with regional-speciﬁc measures
such as the EU’s General Data Protection Regulation (GDPR)?

Conﬁdence of VASPs andRegulatory Bodies❏❏

Have any regulated VASPs conﬁrmed their intention to use the solution?
Has the solution earned the conﬁdence of regulatory bodies?

Straightforward
Implementation❏

Can the solution be implemented without causing major disruption to your complianceteam’s workﬂows?
Can the implementation be conducted in a timely manner?

❏Minimal Friction to End User❏

Can you implement and utilize the solution without signiﬁcantly disrupting the user
experience of your customers?

A step-by-step overview ofa Travel Rule solution workﬂow

Step 1 & 2

Receive and verify wallet address ownership▶▶ Travel Rule Solution Action: Identify the recipient ofthe transaction's beneﬁciary VASP.
After receiving the transfer instructions from thetransaction sender, the originator VASP has to identify whoowns the destination wallet address so that it will know whoto speak to for the information exchange.

This step is similar to a postal service where thesender writes the receiver’s info on an envelope andposts it into a mailbox.

Step 3
Verify that the VASP belongs to a list of VASPs▶▶ Travel Rule Solution Action: Global list of VASPs.
Simply knowing a VASP's identity is not enough- you will have to verify
that the receiving VASP is a trusted entity.
A trusted VASP can be a licensed exchange by jurisdiction or certiﬁed asan ISO Information Security Management System (ISMS) based on
different VASP or jurisdictional policies.
Currently there are a limited number of licensed VASPs in leading
jurisdictions like Japan, and the United States. Therefore the industry isworking on a standard due diligence form for the purposes of identifying
a trusted VASP.
A Travel Rule solution should be able to help conﬁrm that the receiving
VASP is a trusted entity for their member VASPs.

This step is similar to a postal service where theletter arrives at a post office and its destination
country is being checked against a sanctions list toensure that it can be delivered.

Step 4
Acquire VASP Routing Information▶▶ Travel Rule Solution Action: Help originator VASP get
beneﬁciary VASP routing information.
Identify which Travel Rule solutions and protocols they're supporting.
After validating that the receiving VASP is a trusted one, the sending
VASP has to acquire the technical routing information of the receiving
VASP and choose the best way to send the information.
Details the VASP routing information of each Travel Rule solution could
include:API endpoints as communication channels.
Public key for data encryption.
VASP code as a unique identiﬁer.
Fixed Server IP address when a VASP only accepts API
requests from whitelisted IP addresses.

This step is similar to a postal service where thesender identiﬁes the method of deliveryfor example airmail/surface mail/express delivery

Step 5
Exchange-Required Information▶▶ Travel Rule Solution Action: Exchange therequired personal information between twotransacting VASPs.
Originator VASPs initiate the information exchange in a
privacy protected channel to the beneﬁciary VASP.
The beneﬁciary VASP approves the transfer request with
an auditable trail back to the originator VASP.
The originator VASP can continue to send the blockchaintransaction as requested.
Things you should be aware of regarding the exchange:
Transaction speed of the information exchanged.
Extra cost of each exchange.
Data encryption for privacy concerns.

This step is similar to a postal service where the delivery is on the way!

Introducing Sygna Bridge,a Travel Rule solution
developed by CoolBitX.

Sygna Bridge works in real-time and only takes a few seconds to process.

☑ Compliance with FATF requirements, conﬁrmed by Big 4 accounting ﬁrm

In May 2020, CoolBitX shared with the FATF Contact Group proof of its successful Travel Rulecross-border data transfers between leading exchanges SBI VC (Japan), Bitsonic (Korea) and BitoPro(Taiwan). The production report was audited and veriﬁed by a Big Four accounting ﬁrm.

☑ 1st live FATF travel rule solution

Launched in 2019 as a ﬁrst-to-market FATF Travel Rule technical solution to help VASPs comply with theFATF’s updated Recommendation 16 data-sharing requirement.

☑ 20 MoUs signed globally (TW, KR, JP, CA, SG, HK)

In July 2020, it was announced that Sygna Bridge 2.0 supports IVMS101. This achievement marks a major
milestone for a technical solution provider (TSP) - ensuring that its Travel Rule network data iscross-compatible with that of other providers.

We are the leadership team of CoolBitX,

let us show you
how we can help you.
www.coolbitx.com

www.sygna.io”Sygna Bridge is another major step in our complianceefforts, whereby members of the Sygna Alliance may
seamlessly and efficiently share KYC information
without being constricted to a closed loop.”-- Yoshitaka Kitao,President & CEO of SBI Holdings

Sygna Bridge is a compliant, user-friendly, andsecure data exchange solution that allows VASPs
to communicate regulation-ready information.
Taipei - HQ | Tokyo | Seoul | London
San Francisco

Elliptic is a leading provider of blockchain
forensic and AML/CFT compliance solutions
for the cryptoasset industry and ﬁnancial
institutions.
London - HQ | New York | Tokyo | Singapore

We are the leadership team of Elliptic,

let us show you
how we can help you.
www.elliptic.co"Elliptic has been our trusted partner since 2015, helping tostrengthen our AML program and create a new standard forcompliance in the crypto industry. We value their emphasis ondata precision, as well as commitment to build a moretransparent & safer crypto economy."