New US Treasury Guidelines Warn Crypto Industry of Perils of Sanctions Violations

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US $100 notes, physical Bitcoin, cryptocurrency - Sputnik International, 1920, 15.10.2021
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WASHINGTON (Sputnik) - The US Treasury Department on Friday issued new guidelines to warn cryptocurrency users of the perils of sanctions violations, reminding them that it has increasingly targeted the industry for funding money laundering and ransomware acts.
“The growing prevalence of virtual currency as a payment method likewise brings greater exposure to sanctions risks - like the risk that a sanctioned person or a person in a jurisdiction subject to sanctions might be involved in a virtual currency transaction,” the Treasury Department’s Office of Foreign Assets Control (OFAC) said in the guide.
The virtual currency industry - including technology companies, exchangers, administrators, miners, wallet providers and users - plays “an increasingly critical role in preventing sanctioned persons from exploiting virtual currencies to evade sanctions and undermine US foreign policy and national security interests,” the guide said.
A US person determined to be in possession of virtual currency that is required to be blocked as per OFAC regulations must deny all parties access to that currency. The individual must also comply with regulations related to the holding and reporting of blocked assets as well as implement controls that align with a risk-based approach.
The Treasury Department said Americans were not obligated to convert the blocked virtual currency into traditional fiat currency, such as US dollars, and also not required to hold such blocked property in an interest-bearing account. However, blocked virtual currency must be reported to OFAC within ten business days.
To illustrate the prevalence of virtual currencies in sanctions violations, the Treasury Department said it has been increasingly targeting individuals and entities using virtual currency to fund prohibited activities.
As an example, it said on March 2, 2020, OFAC sanctioned two Chinese nationals involved in a North Korean state-sponsored money-laundering scheme that involved the receipt of approximately $100 million in stolen virtual currency. The funds were obtained from cyber intrusions against two virtual currency exchanges and found their way into complex transactions that included the purchase of over $1 million in digital music gift cards.
More recently, on September 21, OFAC designated a Russian virtual currency exchange for facilitating financial transactions for ransomware actors. Based on analysis of known transactions, over 40% of the exchange’s transaction history had been associated with illicit actors, involving the proceeds from at least eight ransomware variants.
“As sanctioned persons and countries become more desperate for access to the US financial system, it is vital that the virtual currency industry prioritize cybersecurity and implement effective sanctions compliance controls to mitigate the risk of sanctioned persons and other actors exploiting virtual currencies to undermine US foreign policy interests and national security,” the guide added.
The Treasury Department reminded cryptocurrency users that failure to adhere to OFAC sanctions requirements could cause considerable harm to the integrity and effectiveness of US sanctions programs and their related policy objectives and result in “substantial” civil and criminal penalties for violators.
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