Sanctioned actors and jurisdictions worldwide are finding new ways to use crypto assets to evade restrictions and continue their illegal activities. Per A recent report from blockchain analytics firm Elliptic.
This is achieved, among other things, through the use of data protection coins, coin swap services, data protection wallets, decentralized exchanges (DEXes) and decentralized financial platforms (DeFi), which do not require a KYC (know-your-customer) procedure for “crypto mining activities carry out or promote. “
The company analyzed the actions of companies sanctioned by the US Treasury Department for Foreign Wealth Control (OFAC). His research shows that crypto asset wallets listed on the institute’s Specially Designated Nationals and Blocked Persons List have received more than USD 175 million in Bitcoin (BTC) and Ethereum (ETH) to date which shows how crypto-sanctioned actors are helping to adapt to a tightening sanctions environment.
The list includes Individuals and companies owned, controlled by, or acting for or on behalf of target countries, as well as individuals, groups and organizations such as terrorist organizations and drug traffickers that are not country-specific.
Your assets are blocked and US persons are generally prohibited from handling them according to OFAC. Between January 2003 and March 2021, the department imposed civil penalties for more than $ 4.3 billion in sanctions violations, Elliptic added.
According to the researchers, some of the emerging issues that make it easier to evade sanctions when using crypto are related to the following:
- an increasing use of privacy coins like Monero (XMR), Dash (DASH) by illegal actors like dark web markets to evade the traceability of other crypto assets;
- An increase in the use of privacy wallets such as Wasabi Wallet, whose use for bitcoin money laundering increased 220% in the past year from 2019, allowing sanctioned companies to launder an estimated $ 160 million worth of bitcoin in 2020.
- illegal actors moving from using large fiat to crypto exchange platforms to coin swap services used by sanctioned actors for money laundering;
- Growth of DEXs and DeFi, which could become a “crypto laundering paradise” used by cybercrime organizations like North Korean Lazarus Group, who hacked Singapore’s crypto exchange KuCoin and used DEXs to recover some of the stolen crypto assets of $ 280 million to wash.
The red flags of potential sanction-related activity include customers attempting to log into an intermediary using IP addresses, email addresses, phone numbers, or other identifying indicators registered in a sanctioned jurisdiction. frequent transactions by or with companies in countries known to be involved in sanction evasion activities for no clear purpose; Frequent sending / receiving of funds to / from exchange services that do not require KYC information and are located in high risk countries etc.
“A rapidly evolving threat landscape and increasing scrutiny by regulators makes it all but certain that the sanctioning challenges for the cryptocurrency industry will become increasingly complex over time.” the report said.