Travel Rule Glossary

Adverse media refers to negative news or information about an individual or entity that is found in publicly available sources. This can include news articles, reports, and online publications that highlight involvement in criminal activities, financial irregularities, or other negative behaviors. Financial institutions use adverse media screening as part of their KYC/AML processes to identify potential risks associated with customers. By searching through these media sources, financial institutions can find information that would indicate that a customer may be a high risk customer, and would then require EDD.

Anti-Money Laundering refers to a set of laws, regulations, and procedures intended to prevent criminals from disguising illegally obtained funds as legitimate income. AML regulations require financial institutions and other regulated entities to monitor customer transactions, report suspicious activities, and implement internal controls. These measures aim to detect and deter money laundering, which involves concealing the origins of illicit funds. AML efforts include customer due diligence (CDD), transaction monitoring, and reporting suspicious activity reports (SARs) to relevant authorities. Ultimately, AML is crucial for maintaining the integrity of financial systems and combating financial crime.

The recipient of a transaction, including cryptocurrency transactions.

Tools and methods used to analyze blockchain transactions and identify suspicious activity; also often described as on-chain analytics.

Crypto Asset Service Provider (CASP) is a synonym for VASP used in some countries.

Customer due diligence - this is the process of businesses verifying the identity of their customers and assessing the potential risks associated with the business relationship. It's a fundamental part of AML/KYC compliance. CDD involves gathering information to understand who the customer is and what their typical transaction patterns are.

Combating the Financing of Terrorism - this is the standard and widely accepted acronym for addressing the prevention and suppression of funding for terrorist activities. It is the standard term used by international bodies like the FATF (Financial Action Task Force), governments, and financial institutions. CTF (Counter-Terrorist Financing) is also used, but it is less common than CFT and carries the same meaning.

Crypto AML is the application of AML regulations and practices to the cryptocurrency space. It encompasses a range of measures aimed at preventing the use of cryptocurrencies for money laundering and terrorist financing. This includes implementing KYC/CDD procedures, monitoring transactions for suspicious activity (KYT), and reporting suspicious transactions to regulatory authorities. KYT is a very important tool used in Crypto AML compliance, as it is an important subset of the actions taken to comply with Crypto AML regulations.

A cryptocurrency wallet is a tool that allows users to store, send, and receive digital currencies. A crypto wallet doesn't actually "hold" the cryptocurrency itself. Instead, it stores the cryptographic keys that give you access to your digital assets on the blockchain. A crypto wallet stores your "private keys," which are like passwords that allow you to authorize transactions. It also works with "public keys," which are like your account number, that others use to send you cryptocurrency. Crypto wallets enable you to interact with the blockchain, allowing you to send and receive digital currencies, and provide an interface to manage your digital assets. There are various types of crypto wallets, including hardware wallets, software wallets, and web wallets. The crypto wallets that are not hosted by an exchange, third party service provider or other VASP are described as unhosted wallets, also know as self-hosted wallets or non-custodial wallets.

Enhanced due diligence - EDD is a more in-depth level of due diligence conducted for customers deemed to be higher risk. This could include politically exposed persons (PEPs), those from high-risk jurisdictions, or those involved in complex or opaque transactions. EDD involves gathering more detailed information and conducting more thorough scrutiny.

Financial Action Task Force - an intergovernmental organization that plays a crucial role in the global fight against money laundering and terrorist financing. The FATF develops policies and standards to combat money laundering, terrorist financing, and the financing of the proliferation of weapons of mass destruction. The FATF was established in 1989 by the G7 (Group of Seven) to address the growing problem of money laundering and to protect the integrity of the international financial system.

“Know Your Business” is the process of verifying the legitimacy of a business entity before engaging in a business relationship. Unlike KYC, which focuses on individual customers, KYB scrutinizes companies, including their ownership structures and operational activities. This involves confirming the business's legal existence, identifying its ultimate beneficial owners (UBOs), and assessing potential risks associated with the entity. KYB is crucial for preventing financial crimes like money laundering and fraud, ensuring compliance with anti-money laundering (AML) regulations, and establishing trust in business partnerships. Essentially, it's about understanding who you're doing business with at a corporate level.

“Know Your Customer” is a set of mandatory procedures used by businesses, particularly financial institutions, to verify the identity of their clients. It's a crucial part of anti-money laundering (AML) and counter-financing of terrorism (CFT) efforts. KYC involves collecting and verifying customer information, assessing potential risks, and monitoring transactions for suspicious activity. This process ensures that businesses understand who they're dealing with, helping to prevent illegal activities and maintain regulatory compliance. Essentially, KYC is about establishing and confirming a customer's identity and assessing the risk they pose.

Know Your Transaction - KYT focuses on analyzing the actual transactions themselves. It's about monitoring and scrutinizing the flow of funds to detect suspicious patterns or activities. This involves tracking transaction details, identifying unusual behaviors, and assessing the risk associated with each transaction. In the context of cryptocurrencies, KYT involves analyzing blockchain data to trace the movement of digital assets and identify potentially illicit activity. Essentially, while KYC looks at "who" the customer is, KYT looks at "what" the customer is doing.

“Legal person” refers to an entity that is recognized by law as having rights and responsibilities, such as a corporation, company, or organization. Legal persons can enter into contracts, own property, and be held liable in legal proceedings. Therefore, financial institutions have to conduct KYB, to know who they are dealing with when dealing with these types of customers.

“Natural person” refers to a human being, an individual, as opposed to a legal entity. In financial regulations, this distinction is crucial for identifying the actual individuals involved in transactions.

The sender of a transaction, or cryptocurrency transaction.

Politically exposed person - A PEP is an individual who is or has been entrusted with a prominent public function. These individuals often hold positions of power and influence, which can make them more susceptible to involvement in bribery, corruption, and money laundering. Therefore, financial institutions and other regulated entities are required to conduct enhanced due diligence (EDD) on PEPs to mitigate the associated risks. PEPs can include heads of state, government officials, senior politicians, high-ranking military officers, and senior executives of state-owned enterprises.

The process of checking customer information against lists of individuals and entities subject to sanctions.

Suspicious Activity Report - An SAR is a report filed with regulatory authorities when suspicious transactions or activities are detected.

A requirement that VASPs share originator and beneficiary information for cryptocurrency transfers exceeding a certain threshold.

Ultimate Beneficial Owner or UBO - natural person(s) who ultimately own or control a legal entity.

Unhosted wallets are crypto wallets that are controlled or owned by a natural person or legal person, and not controlled or hosted by a service provider. Synonyms include self-hosted wallets or non-custodial wallets.

Virtual Asset Service Provider - This is a term coined by the Financial Action Task Force (FATF) to describe businesses that provide services related to virtual assets (crypto assets). VASPs can offer a range of services, including exchange between virtual assets and fiat currencies (e.g., USD, EUR), exchange between one or more forms of virtual assets, transfer of virtual assets, safekeeping, holding custody and/or administration of virtual assets or instruments enabling control over virtual assets, as well as participation in and provision of financial services related to an issuer's offer and/or sale of a virtual asset.

A term used by the FATF, governments and institutions for a digital tokenized representation of value that can be digitally traded or transferred, and can be used for payment or investment purposes. Synonyms include digital asset, cryptocurrency, crypto token, etc.

A unique alphanumeric identifier that represents a cryptocurrency wallet.