Report Sanction Breaches Must Be Reported, UK Tells Crypto Exchanges in A Rule Update

The United Kingdom’s Office of Financial Sanction Implementation (OFSI) has included “cryptoassets” in a list of assets that must be frozen if they belong to a person or company who is facing sanctions.

These developments come as the list of sanctioned Russian entities continue to increase.

Eye on Sanctioned Accounts, Breaches

As per the new rules, crypto exchanges will face criminal charges if they “fail to report clients designated for sanctions.” The exchanges must identify and report sanctioned customers and their transactions immediately to UK authorities, said a report in The Guardian.

The official guideline on financial sanctions was updated on August 30 to include digital assets amid growing concern that Russia might be using bitcoin and other digital assets to “dodge” financial restrictions imposed on it following the invasion of Ukraine.

A UK Treasury Department spokesperson said: “It is vital to address the risk of cryptoassets being used to breach or circumvent financial sanctions. These new requirements will cover firms that either record holdings of, or enable the transfer of cryptoassets and are therefore most likely to hold relevant information.”

Sanctions Targeting Digital Assets

In April, after resisting sanction provisions for some time, Binance stopped deposit and trading facilities for Russian people and entities having crypto assets in excess of EUR 10,000. These accounts were put under “withdrawal-only” mode.

The world’s largest crypto exchange blocked the accounts of some of the most prominent Russian individuals, including Elizaveta Peskova, daughter of Russian President Vladimir Putin’s Spokesperson, Dmitry Peskov and Polina Kovaleva, stepdaughter of Russian Foreign Minister Sergei Lavrov.

Some of the prominent targets of sanctions include Vladimir Potanin, Said Gutseriev, and Oleg Deripaska. Potanin was previously Russia’s second richest man and had invested in Swiss blockchain company Atomyze. Son of an oligarch, Gutseriev had acquired a stake in a Belarus-based crypto exchange. Deripaska is a metal billionaire and had advocated BTC to be used as a means of payment.

Preventing Illicit Flow of Funds

Although not directly linked to sanctions against Russia, the US Treasury Department’s decision to ban crypto mixer platforms Blender.io in May and Tornado Cash in August significantly reduces the possibility of sanctioned individuals and companies being able to transfer their crypto assets without getting noticed.

Interestingly, Alexy Pertsev, whose company PepperSec had developed Tornado Cash, was found to have worked with Russia’s Federal Security Service (FSB) and was arrested by Dutch authorities two days after Tornado Cash was banned.