LCX Travel Rule Regulations

In 2019, the Financial Action Task Force (FATF), a global international anti-money laundering and counter-terrorist financing watchdog, extended its anti-money laundering and counter-terrorist financing (AML/CFT) measures to virtual assets (VA) and virtual asset service providers (VASPs). The Travel Rule, also known as FATF Recommendation 16, is a set of guidelines designed to prevent money laundering and terrorist financing. The Travel Rule mandates that VASPs obtain and disclose details pertaining to the sender and recipient of a virtual asset transfer to counterpart VASPs or financial institutions, either during the transaction or prior to it.

European Travel Rule regulations require LCX Europe and LCX Germany to obtain additional counterparty information when a user receives a deposit from outside the LCX platform or withdraws to a non-LCX destination address. In order to comply with these requirements, LCX may not be able to process a user’s crypto transfer if counterparty information is not available. Please see the Transfer of Funds Regulation for more information.

In order for LCX to comply while minimizing disruption of service, users are required to input all destination addresses to their Address Book prior to being able to complete a withdrawal off the LCX platform. European users will have unique travel rule requirements when adding addresses to their address book.

Address Book Requirements

The following are requirements for users on LCX Exchange:

• Wallet Type - Users must select whether the address is associated with an Exchange or Self Hosted Wallet
• Exchange (VASP)
• Users will be prompted with a list of Virtual Asset Service Providers (VASPs) approved in the jurisdiction. Users will only be allowed to withdraw to an address hosted by an approved VASP.
• After selecting the VASP, the user will be prompted to either attest to ownership of the external wallet or populate the Business Name and Country associated with the wallet address.
• Self Hosted Wallet
• When withdrawing to a self hosted wallet, the user must attest the ownership of the wallet address. Users will not be permitted to withdraw to a wallet that they do not control. When withdrawing to a self hosted wallet, the user must attest the ownership of the wallet address. Users will not be permitted to withdraw to a wallet that they do not control.

If a user is unable to provide any of the required information above or if the address is not registered to an approved VASP, the user will not be able to transfer funds to that address.

Updating Addresses in the Address Book

All addresses added to the user’s address book prior the regulatory update will remain unavailable for withdrawals until required Travel Rule information is provided. Within the Address Book the user will see a status stating ‘Needs Updating’ for any addresses with incomplete information.

Select ‘Needs Updating’ to populate the additional information related to the address. Once the information is saved, the address will be eligible for withdrawals

How to withdraw funds to a VASP? Local regulation requires that Travel Rule information be sent from one institution to the other with a crypto transfer, which can only be done if both institutions use the same Travel Rule compliance solution(s). LCX Exchange will therefore require a selection of the VASP in control of the destination address prior to withdrawing funds. If the user is unable to answer this question or if the VASP is not supported by the same Travel Rule compliance solution used by LCX, we recommend that the user withdraw funds to a self hosted wallet.

How to withdraw funds to a Self Hosted Wallet? In order to confirm ownership of a self hosted wallet, LCX Exchange will require the user to connect to their wallet and perform two-step verification via a digital signature. LCX Exchange will support a number of self hosted wallets. Please note, at this time only assets on the Ethereum blockchain are supported.