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The European Banking Authority (EBA) announced the new consultation process to implement the crypto travel rule on transactions to regulate virtual asset service providers (VASPs) and prevent the digital trading agency from money laundering and terrorism financing.
The EBA has launched consultations that seek to collect feedback from the crypto asset service providers (CASPs) to apply the travel rule implemented to secure investor trading. Travel laws are focused on preventing abuse of the crypto firms and virtual asset transfers for money laundering and terrorist financing. They also designed a consultation process in June to deal with the customer due diligence in the crypto asset firms. The EBA stated that most European authorities and investors believed virtual assets are high-risk associated and the chance of scams is significant compared to other investing opportunities. According to the EBA, these risks are linked to different factors, such as “the pseudo-anonymity of transactions, the interaction with the dark web, the use of crypto-assets in predicate offenses such as cybercrime, complex fraud schemes, crypto-investment scams, increasing money laundering, and circumvention of sanctions.”
The latest rules outline a series of steps that CASPs need to uphold in order to ascertain if the person initiating the transaction is in charge of both involved addresses. These include, among other things, using advanced risk assessment tools, video ID verification of the user, transferring a certain amount to the CASP’s account, signing a particular message in the accounts and wallet software, and asking the client to sign a message in the same software digitally. The presented guidelines urged compliance with the travel rule if the transactions come from the unhosted wallets into the licensed CASPs. However, the unhosted wallet users must uphold the travel rules if the depositing amount is over £1,000.
CASPs should collect the users’ data to verify the customer’s identity. They also have to use two procedures to gather information about the users. However, if the data is insufficient for verification, CASPs can leverage more processes to complete the collection of the required information. They should use robust technology for customer verification and mitigate risk associated with crypto transactions. CASPs have to track and keep records of customer transactions for auditing purposes. They must monitor customer activity to detect suspicious activity. Finally, they should provide customers with clear and transparent policies regarding customer verification.