CODE: Blockchain-based Travel Rule Compliance System

Abstract

Financial Action Task Force (FATF) guidelines specifies a 'travel rule' to prevent illegal usages of virtual assets such as money laundering. Following the travel rule, Virtual Asset Service Providers (VASPs) should exchange personal identity information of originator and beneficiary when transferring virtual assets. In this paper, we propose CODE, a novel decentralized blockchain-based travel rule compliance system. Since blockchain does not need any third party, it can eliminate the possibility of massive data leakage due to centralization. It also ensures secure management of travel rule data. We developed a system that uses Corda as a blockchain platform. According to the characteristics of Corda, data are only shared between related parties. Our system also provides an address-search method to verify the beneficiary's identity in real-time. An originator requests virtual asset transfer using only the beneficiary's virtual asset address. By joining the Corda network and installing the proposed system developed in the form of a CorDapp, any VASP can easily use this system to exchange travel rule data.