Travel Rule

In cryptocurrency, Travel Rule is a regulatory compliance to enhance transparency, prevent frauds, money laundering, and terrorist funding in transactions. It mandates that based on the jurisdiction regulations, a Virtual Asset Service Provider (VASP), such as a cryptocurrency exchange, needs to collect and share certain information of the transaction sender and receiver above a certain threshold. This information typically includes details like the sender's and receiver's names, addresses, and account numbers.

This compliance requires you, as a VASP, to collect information from your customers and share it with other VASP, when your customer sends/receives funds from a customer belonging to that VASP. By collecting and sharing this information, you can ensure that the transactions are compliant with the regulations of your jurisdictions, thereby avoiding the risk of license loss.

The following infographic illustrates the flow of a Travel Rule transaction.

Liminal and Notabene integration

Liminal has partnered with Notabene, which is a third-party platform to manage transaction risks and perform compliance checks for Travel Rule. Notabene blocks the transaction requests initiated from sanctioned addresses. With Notabene, you can accept or reject Travel Rule transaction requests through automation based on the predefined criteria. You can securely exchange and store customer information. Additionally, you can also whitelist the authenticated businesses for fund transfers.

Both originator VASP and beneficiary VASP should be integrated with Notabene for these transactions. Liminal currently only supports Notabene, which may or may not be supported by other VASPs. The implementation of rules minimizes the manual work for the compliance team. You can enable the following rules in Notabene:

Automatically accept transactions
Manually review transactions
Add custom actions on the transactions based on a certain VASP, jurisdiction, amount, etc.

Outgoing transaction flow

The flow of an outgoing Travel Rule transaction from Liminal Vaults is as follows:

You, as the originator VASP, enable the travel rule in Liminal Vaults. Your customer initiates an outgoing transaction. If the travel rule is turned on, the customer of the VASP provides the required details about transaction, personal details, originator VASP, beneficiary VASP, and receiver. For more information, see Send a transaction with Travel Rule.
Liminal verifies the travel rule details and sends the transaction to Notabene.
Notabene sends webhook notifications to Liminal on the status of the transaction.
Based on the Travel Rule settings configured in Notabene for transactions, Liminal allows or blocks the transaction.
Once the transaction is sent, Liminal updates the Travel Rule message with the transaction hash in Notabene, completing the transaction flow with Travel Rule.

Incoming transaction flow

The flow of an incoming Travel Rule transaction in Liminal is as follows:

You, as the beneficiary VASP, configure Travel Rule settings for incoming transactions in Notabene to automatically or manually confirm the transactions.
When the originator VASP sends a Travel Rule transaction to your customer, Notabene sends a webhook notification of the destination address to Liminal.
Liminal validates whether the address belongs to the customer or not, if beneficiary VASP is configured on Notabene or not. If the settings aren’t set to auto-confirm, a customer may require to review them manually. Liminal notifies the customer on the transactions with pending actions.
When a new deposit is made, Liminal will check with the configured Travel Rule provider if a travel rule message exists for the same. If yes, Liminal will link the transaction with the message.
If the travel rule message does not exist, Liminal will create a new empty travel rule message and link the same with the transaction.
The compliance officer or admin of the beneficiary VASP ensures that the travel rule data is complete in Notabene dashboard.

Travel Rule transactions status, messages, and Liminal actions

Notabene sends webhook notifications to Liminal on transaction statuses along with the Travel Rule information/messages. These statuses are further communicated with the originator and beneficiary VASPs. These statuses are described as follows:

Status	Notabene Description	Liminal Action
NEW	Message has been created.	NA
MISSING_BENEFICIARY_DATA	Message is missing information about the beneficiary (created with skipBeneficiaryDataValidation=true).	NA
WAITING_FOR_INFORMATION	Missing contact details to reach the beneficiary VASP. Notabene to action.	Allow
CANCELLED	Message has been automatically or manually cancelled.	Block
INCOMPLETE	Message has been created with txNotify and is missing both originator and beneficiary information.	Cancel
SENT	Message has been sent to the beneficiaryVASP.	Allow
ACK	Beneficiary VASP has confirmed they have the destination address.	Allow
ACCEPTED	Beneficiary VASP accepted your request.	Allow (Phase 2)
DECLINED	Beneficiary VASP declined your request.	Block (Phase 2)
REJECTED	Beneficiary VASP does not have the destination address.	Block (Phase 2)
NOT_READY	Beneficiary VASP is not ready to respond to messages.	NA

Achieve Travel Rule compliance

You can set up Travel Rule compliance with Liminal. Take the following steps to make your VASP compliant with the Travel Rule.

Manage Travel Rule transactions using APIs

Liminal also offers a set of APIs to manage operations on the Travel Rule based transactions for hot withdrawal wallets. For more information, see Transfer with Travel Rule.