Virtual Asset Transfer Verification Node for FATF Compliance
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Solution Overview
Problem
Existing virtual asset transaction systems face challenges in complying with FATF obligations, leading to issues with protocol compatibility and anonymity in transactions, which can facilitate money laundering and terrorist financing.
Innovation Solution
A method for mediating virtual asset transmission that involves a verification node to enhance security by verifying recipient information, integrating and managing transactions across VASPs, and ensuring compliance with FATF obligations through a blockchain network.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If a VASP independently changes the system to comply with FATF obligations, then compliance with regulatory requirements is improved, but protocol compatibility between VASPs deteriorates
Solution Approach 1:
The patent introduces a verification node as an intermediary between sender and recipient VASPs. This mediator standardizes the verification process by implementing统一的FATF compliance protocols, allowing different VASPs to maintain their existing systems while achieving regulatory compliance through the intermediary's standardized verification mechanisms.
Solution Approach 2:
The patent segments the compliance verification process into independent modular components that can be selectively implemented. The verification node handles specific FATF obligations (recipient verification, information exchange) separately from core transaction processing, allowing VASPs to adopt compliance measures without redesigning their entire system architecture.
2Reliability
If recipient information is verified to prevent money laundering, then security and compliance are improved, but transaction anonymity deteriorates
Solution Approach 1:
The patent applies verification requirements selectively rather than universally. The verification node focuses specifically on verifying recipient information when required by FATF obligations, while leaving other aspects of the transaction system unchanged. This localized approach ensures compliance where necessary while preserving anonymity where not required.
Solution Approach 2:
The verification node acts as an intermediary that handles the sensitive verification process separately from the main transaction flow. It collects and verifies recipient information only when needed, then discards it after verification, allowing the core transaction system to maintain anonymity while still meeting regulatory requirements through the intermediary's controlled information handling.
3Reliability
If a verification node is introduced to verify recipient information, then security and compliance are improved, but system complexity increases
Solution Approach 1:
The verification node is designed as a multi-functional component that handles multiple FATF obligations within a single system element. It performs recipient verification, manages information exchange between VASPs, maintains verification records, and enforces compliance protocols all through one unified node, reducing the need for multiple separate systems.
Solution Approach 2:
The verification node operates autonomously to perform verification tasks without requiring manual intervention. It automatically requests recipient information from recipient VASPs, verifies compliance with FATF obligations, and communicates verification results back to sender VASPs, reducing operational complexity despite adding system components.
Data Source
AI summary
Disclosed is a method for use in a transmission of a virtual asset from a sender having a sending account at a sending virtual asset service provider (sending VASP) to a recipient having a receiving account at a receiving virtual asset service provider (receiving VASP). The method involves subsequent to verification that the receiving account at the receiving VASP is valid, determining, by a verification node, if the transmission has been recorded on a blockchain network; and subsequent to determination that the transmission has been recorded on the blockchain network, sending, by the verification node to the receiving VASP, a request to update the receiving account at the receiving VASP about the transmission of the virtual asset from the sender to the recipient. In the method, the verification node does not belong to either the sending VASP or the receiving VASP.