New Treasury sanction guidelines set for virtual currency companies in the US
Ransomware and financial criminals utilising cryptocurrencies for the purposes of conducting illegal transactions have become key issues of focus for the Biden administration of late, and they have pressed the treasury to release guidelines on sanctions which will face those found to be culpable in these matters.
This movement comes after a sharp increase in money laundering being found to be taking place via ransomware payments. According to FinCEN, close to $600 million in transactions linked to potential money laundering via ransomware payments were reported by U.S. banks in the first six months of this year alone.
For over a decade, financial crime organisations such as the Financial Crimes Enforcement Network have fought for more clarification around cryptocurrency companies, and their obligations under U.S. anti-money-laundering laws.
The guidance that has been created by the Treasury’s Office of Foreign Assets Control, or OFAC, have tailored traditional sanctions-compliance principles to fit virtual currencies.
According to The Wall Street Journal, the guidance will apply to virtual-currency exchangers, administrators, miners, wallet providers and other financial institutions who operate with virtual currencies.
The guidance offers an array of best practices for market participants who are active with digital currencies as providers, and those who are actively involved as traders in the market.
The guidance comes at a time of much uncertainty around the status of regulation in an industry that is both growing and evolving at an increasingly rapid pace.
Main highlights of the new guidance include:
- There will need to be additions of geolocation tools, to identify and block IP addresses originating from sanctioned countries
- Increased transaction monitoring to identify and investigate virtual-currency transactions involving sanctioned entities and individuals
- Conducting periodic review assessments over transactions if the Treasury’s sanctions unit blacklists a new virtual-currency address
- How prohibited virtual-currency transactions are blocked. If a U.S. resident, citizen, or company determines that they hold a virtual currency that OFAC requires to be blocked, they must deny all other individuals access to the currency and report the currency to the government within 10 business days.
The guidance was released alongside a report by Treasury’s FinCEN
The report identified recent ransomware trends in anti-money-laundering law data, highlighting the need for financial institutions to report suspicious transactions to FinCEN under the Bank Secrecy Act law.
The report suggested that SARS reporting will need to be conducted for transactions moving forward which will help to keep compliance across many exchanges, especially in centralised ones where digital currencies can be converted into cash.
This type of reporting will also allow regulators to have the necessary information to keep issues of ransomware fraud at bay.
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