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No Crypto Free Pass on US Sanctions Enforcement – Export Controls and Trade and Investment Sanctions

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US law enforcement agencies continue to show growing interest in using cryptocurrency to evade sanctions. The Office of Foreign Assets Exchange (OFAC) has blacklisted some cryptocurrency exchanges (see Treasury takes robust action to counter ransomware | United States Department of the Treasury) in addition to seeking a settlement of $500,000 with a crypto processing company that accepted nearly $130,000 in digital currency payments from sources in sanctioned countries such as North Korea and Iran (see Settlement Agreement between Bureau of the United States Department of Treasury’s Foreign Assets Control and BitPay, Inc. | United States Department of Treasury).

More recently, the Department of Justice received a favorable probable cause ruling from a federal magistrate allowing it to prosecute a certain anonymous individual for allegedly moving over $10 million in bitcoins between the United States and a certain country. sanctioned anonymously (see 22mj00067CriminalOpinion.pdf (uscourts.gov)).

Apparently, the defendant in this case established a payment platform in a sanctioned country and then used a US-based entity as a front to support the platform’s operations. It also appears that the defendant advertised the platform’s services as a way to evade US sanctions by claiming that bitcoin helps hide the money trail.

According to some reports, this is the first
criminal the prosecutions have focused on the use of cryptocurrencies to evade sanctions. The investigating judge confirmed unequivocally that the use of virtual currency does not protect against the application of American sanctions; virtual currency is subject to OFAC sanctions regulations. This judicial assertion follows guidance that OFAC itself issued last year which also confirmed that sanctions compliance applies. alsovirtual currency and fiat currency transactions (see Publication of Sanctions Compliance Guidance for the Virtual Currency Industry and Updated Frequently Asked Questions | US Department of the Treasury).

Of course, these aren’t earth-shattering decisions, but apparently they bear repeating given the common misconceptions that digital currencies/assets are both untraceable and untouchable beyond the reach of the law.

Originally published May 19, 2022

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