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The Travel Rule aims to combat money laundering and terrorism financing by detecting the potential illicit flow of funds through VASPs.
It requires VASPs to exchange information about the originators and beneficiaries of crypto transactions over a certain threshold.
Both the originator and beneficiary need to verify and check the identity of the counterparty, and screen for any links to sanctioned entities.
Before transacting, the originating VASP must determine if the transaction is being made to a hosted or self-hosted wallet.
Before the transaction can begin, the originator must verify its name, account number, and physical address (or national identity number). The beneficiary VASP must also verify its name and account number. This can be done using a trusted labelling tool, like Crystal Expert.
Both parties must conduct due diligence on the counterparty VASP, including screening for sanctions, to assess the risks related to transacting with each other.
