Crypto Compliance, AML and KYC
Free Chainalysis Cryptocurrency Fundamentals Certification practice — 6 questions on Crypto Compliance, AML and KYC, with explanations. No sign-up. Full 12-question mixed test →
A VASP is determining whether a cryptocurrency transfer triggers Travel Rule data-sharing obligations under FATF Recommendation 16. Under FATF's guidance, what is the threshold above which originator and beneficiary information must be collected and transmitted?
FATF Recommendation 16 (the 'Travel Rule') sets the threshold at USD/EUR 1,000 — transfers above this amount require VASPs to obtain, hold, and transmit required originator and beneficiary information to the counterparty VASP.
A VASP in a jurisdiction with fully implemented Travel Rule regulations sends a transaction to a VASP in a jurisdiction that has not yet enacted Travel Rule legislation. This scenario, where uneven regulatory implementation timelines across jurisdictions create compliance gaps, is commonly referred to as what?
The 'sunrise issue' describes the compliance gap created because countries adopt and enforce FATF Travel Rule requirements at different times, meaning a compliant VASP may still transact with a counterparty VASP that has no legal obligation (or capability) to send/receive required data.
A compliance analyst uses a KYT (Know Your Transaction) tool to monitor incoming deposits. The tool flags a transaction because the funds passed through two intermediary wallets before reaching a darknet market, rather than being sent directly from the market. This type of exposure is best described as:
Indirect exposure refers to funds that trace back to a high-risk entity (like a darknet market) through one or more intermediary addresses/hops, as opposed to funds received directly from the risky entity's known wallet.
Under a risk-based AML program, which scenario would MOST likely require a VASP to apply Enhanced Due Diligence (EDD) rather than standard Customer Due Diligence (CDD)?
Politically Exposed Person (PEP) status combined with funds sourced from a high-risk jurisdiction are classic risk factors that FATF and AML frameworks identify as triggering mandatory Enhanced Due Diligence, including deeper source-of-funds verification and ongoing enhanced monitoring.
OFAC has added specific cryptocurrency wallet addresses to the Specially Designated Nationals (SDN) List, such as those associated with the Lazarus Group. What is the PRIMARY compliance obligation this creates for a U.S. VASP?
Once a wallet address is designated on the OFAC SDN List, U.S. persons and VASPs are legally required to block/freeze any assets involving that address and file a blocked property report with OFAC, regardless of transaction size or counterparty location.
Under the FATF definition of a Virtual Asset Service Provider (VASP), which of the following entities would generally NOT be classified as a VASP?
FATF's VASP definition centers on entities that conduct exchange, transfer, safekeeping/administration of virtual assets, or participate in financial services related to an issuer's offer/sale, as a business on behalf of another person. A developer who releases non-custodial, open-source software with no ongoing control over user funds or business relationship does not meet this definition.
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