How to Validate Payee Information in a Virtual Asset Transfer

Why It Matters

Under FATF Recommendation 16 and various jurisdictional implementations of the Travel Rule, virtual asset service providers (VASPs) must collect and transmit accurate payee (recipient) information for qualifying virtual asset transfers. Incomplete or non-compliant data can lead to regulatory breaches, hinder traceability, and expose your firm to sanctions or de-risking.

What You Need to Validate

Before executing a virtual asset transfer, ensure the following payee information is present:

Full Name of the payee
Wallet Address (or equivalent unique identifier)

In addition, if your Travel Rule solution includes optional fields (e.g. physical address, national ID, date of birth), these may be included depending on your counterparty’s policies and applicable regulations. If additional payee information is provided, it must comply with FATF standards and local Travel Rule legislation.

Note: Some jurisdictions require full Travel Rule data for all transactions, while others apply thresholds (e.g. transfers above USD/EUR 1,000). Know your local obligations.

Step-by-Step Validation Process

Step 1: Confirm Mandatory Fields Are Present

Ensure that both the payee’s name and wallet address (or equivalent unique identifier) are present before the transfer is initiated.

Step 2: Verify Data Format and Consistency

Validate that the name is complete and properly formatted. Confirm that the wallet address is correctly structured and belongs to the intended recipient (e.g. through address whitelisting, test transaction, or wallet verification protocol).

Step 3: Validate Additional Fields if Provided

If other identifiers are transmitted (e.g. physical address or ID number), ensure the information is accurate, consistent with KYC records, and compliant with FATF standards. Do not transmit placeholder or dummy values.

Step 4: Document or Store the Data

Retain the validated payee information in a secure, auditable format in accordance with local data retention laws (often a minimum of five years).

Step-by-Step Validation Process

Red Flags to Watch For

Anonymous wallet addresses with no verified identity
Incomplete or vague recipient names
Placeholder or synthetic data in optional fields
Repeated use of the same address for unrelated payees

When to Escalate

If payee information is incomplete, unverifiable, or suspicious:

Delay or suspend the transfer
Request additional information from the counterparty VASP or user
Notify compliance or risk functions for review

Summary

In virtual asset transfers, validating payee information is a regulatory obligation and a risk control. Even if your Travel Rule solution handles data exchange, it is your responsibility to ensure that required information is complete, correct, and compliant before approving the transfer. Always treat additional fields with the same rigor as mandatory ones.