Rising Ransomware Attacks Bring More Cryptocurrency Sanctions
October 20, 2021
As the popularity and adoption of cryptocurrency grows by individuals and certain governments—El Salvador, for example has adopted Bitcoin as legal tender—greater focus is being placed on regulating what the current chairman of the SEC considers to be the “wild west,” in efforts to quell money laundering and other financial crime.
Imposing sanctions on organizations that facilitate money laundering is one of the responsibilities of U.S. Treasury’s OFAC (The Office of Foreign Assets Control). The addition of Russian-based SUEX digital OTC broker to OFAC’s Specially Designated Nationals and Blocked Persons (SDN) list is significant because it is the first time a cryptocurrency exchange or OTC broker has been added to such list.
Cryptocurrency Sanctions & Regulations
There has been a greater focus from regulatory bodies worldwide on making sure the crypto industry is properly regulated, including the introduction and enforcement of specific guidelines for Anti-Money Laundering (AML), Know Your Customer (KYC) and Counter Financing of Terrorism (CFT). Digital currency exchanges and OTC (Over-The-Counter) brokers are an important part of the ecosystem when it comes to turning virtual currencies into FIAT (government-issued) currencies. Therefore, nefarious actors rely on poorly regulated exchanges or OTC brokers to turn their crypto assets into FIAT currency, as well as the increasing use of ransomware attacks and crypto ransom payments.
Generally, most exchanges conduct legal operations, be it in a clear regulated framework (US, EU, Singapore, Japan, China, etc.) or not. However, there are some exchanges that are in mostly non-regulated jurisdictions, that facilitate nefarious transactions. Such is the current case for Russia-based SUEX. Russia’s legal stance on cryptocurrencies is currently under review—a proposed law to regulate the use of cryptocurrencies in the country is delayed and still being evaluated. As such, SUEX has been able to operate outside a proper regulatory framework.
Given the addition of SUEX to OFAC’s SDN sanctions list, regulated companies subject to US OFAC must ensure that their transactions are not dealing with SUEX, whether in different physical addresses or with any of the crypto addresses that are part of SUEX. It is imperative that any organization dealing with or in cryptocurrency continually screens crypto addresses against the updated SDN list.
As regulatory bodies worldwide continue to issue and enforce more stringent KYC, money laundering checks, sanctions, customer due diligence and transaction monitoring requirements under AML and CFT regulations, the exploitation by criminals of the financial ecosystem for money laundering purposes, particularly of the digital currency ecosystem, should be reduced.
In theory, and in practice, the nature of blockchains should enable better tracking and enforcement technologies to truly mitigate the risk of money laundering in the crypto ecosystem, which is much more achievable than in the non-blockchain world, however, we are just not there yet.
Learn how to meet cryptocurrency challenges and regulations without compromising AML compliance here.