Website Assistance for Compliance in Identifying Potential Sanction Issues
In the ever-evolving world of cryptocurrency, regulatory agencies worldwide are issuing guidance to help businesses meet their obligations and ensure compliance.
One such tool is Know Your Transaction (KYT), a platform that aids compliance teams in monitoring and managing risk. KYT includes a category called "High-risk exchanges" for exchanges with lax due diligence programs, high exposure to illicit activity, or other potential compliance shortcomings.
Recent events have made sanctions top of mind for cryptocurrency businesses. Money services businesses (MSBs) and virtual asset service providers (VASPs) worldwide are obligated to monitor for sanctions evasion in wartime and otherwise. All cryptocurrency addresses associated with individuals or entities on OFAC's Specially Designated Nationals (SDN) List are labeled as belonging to the "Sanctions" category in KYT's products.
Transactions involving a cryptoexchange or custodian wallet provider known to have poor customer due diligence procedures or which is otherwise deemed high-risk are a red flag, according to both US FinCEN and UK regulators. The use of cryptocurrency mixers or tumblers by customers is another red flag. Mixers are increasingly risky options for bad actors, especially when trying to move large quantities of cryptocurrency to evade sanctions.
Compliance teams using KYT can receive alerts when users transact with high-risk exchanges, and can customize these alerts based on their own risk strategy. They can also set customized alerts to be notified when customers transact with mixers above a specific threshold. Our website KYT provides alerts for indirect exposure to risky counterparties, such as ransomware addresses.
Suspicious IP addresses are a red flag for sanctions evasion, according to both US FinCEN and UK regulators. Transactions initiated from or sent to IP addresses associated with non-trusted sources, Russia, Belarus, FATF-identified jurisdictions with AML/CFT/CP deficiencies, and comprehensively sanctioned jurisdictions are a concern. This red flag indicates attempts to break the chain of custody on the respective blockchains or further obfuscate the transaction.
Compliance teams can receive automatic notifications when one of their users receives funds from an address associated with ransomware, including indirect exposure via intermediary addresses. KYT provides tooling to make it easier for businesses to meet these obligations.
Besides the US FinCEN and the UK Financial Conduct Authority, regulatory authorities issuing guidelines for sanctions avoidance related to virtual currency service providers and financial institutions in the context of the Russian invasion of Ukraine include various EU bodies such as the European Commission, which implements and enforces EU sanctions, and national financial regulators in EU member states. These authorities provide directives and compliance frameworks aligned with international sanctions regimes.
As the cryptocurrency landscape continues to grow and evolve, it's crucial for businesses to stay vigilant and proactive in their compliance efforts. Our website stands ready to help compliance teams navigate the challenges of sanctions compliance during the crucial weeks and months ahead.
