Visual Proof Method Explained

A visual proof can be a screenshot or a video clip shared by the wallet user displaying the address the wallet user wants to send or receive their digital assets with the VASP.
The VASP will verify that the address displayed matches the desired address. If the addresses match, the transaction will receive the go-ahead.
Visual Proofs are one of the easiest wallet verification methods available to self-hosted wallet owners; however, it is also the most susceptible to risk.

Why Would a VASP Request Verification of a Self-hosted Wallet?

For compliance purposes, VASPs must adhere to country-specific rules when transacting with self-hosted wallets as part of their AML efforts.

The Travel Rule stipulates that VASPs must identify the owner of the self-hosted wallet if at least one obliged entity is involved in the transaction. Depending on local regulations, collecting this information may be sufficient, while in other cases like Switzerland and Singapore, VASPs must verify the ownership of the self-hosted wallet. VASPs must verify the ownership of the self-hosted wallet.

21 Travel Rule & Visual Proofs:
How It Works

From a VASP’s Perspective 

This process can be 100% automated for the VASP. The prompts below are if the process were to be done manually.

1. In the 21 Travel Rule software, Visual Proof is to be selected.

   A pop-up will open requesting the following information:

   • the Customer ID,
   • the customer’s wallet address,
   • the digital asset type.

   This information is to be completed; thereafter, the visual proof is to be uploaded.

2. After the upload of the visual proof provided by the customer, Add Proof is to be selected. Thereafter, the proof will automatically appear in the Compliance Dashboard. 

From a VASP Customer’s Perspective 

1. The wallet user accesses their account at the VASP and initiates the withdrawal process by inputting the wallet address and amount.
2. Next, the wallet user will take a screenshot (or a video, depending on the VASP’s requirements) of their wallet, which will display the desired withdrawal address.
3. This visual proof is then forwarded to the Compliance Team who scrutinises its validity. If the addresses match, the transaction will proceed. This process can take minutes to hours.

What Are the Pros?

• Familiar and easy to perform for wallet users,
• Works with every wallet.

What Are the Cons?

• Screenshots and video clips are sensitive to fraud as they can be tampered with,
• Time-consuming and error-prone as the image or video needs to be examined by a VASP staff member,
• Transfer turnaround time is slowed down due to the manual inspection element, resulting in a bad user experience,
• Difficult to automate due to the vast amount of self-hosted wallets available,
• Encourages address reuse due to the VASP trying to avoid inspections, which is bad for the customers and the VASPs privacy.