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For the first time, the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has identified crypto exchanges as a primary money laundering concern.
The US Department of Justice and the Treasury Department today announced a major international enforcement action against the Hong Kong-registered crypto exchange Bitzlato and the arrest of its founder and majority owner Anatoly Legkodymov – a Russian citizen – for money laundering.
In a Jan. 18 press release, FinCEN designated Bitzlato as a “primary money laundering concern” under Section 9714 of the Russia Anti-Money Laundering Act to disrupt its provision of services to known Russia-related criminal activity — specifically, his ties to the Russia-linked darknet. market Hydra. The action prohibits covered US financial institutions from facilitating certain transactions involving Bitzlato.
The designation was made under Section 9714 of the Russia Anti-Money Laundering Act, which has a similar effect to FinCEN’s 311 Action under the USA PATRIOT Act – an authority used only for a select number of financial institutions over the past 20 years or more involved. in heavy and large-scale money laundering.
The Elliptic team quickly conducted research and updated our tracking tools so customers can immediately identify exposure to this entity.
Russia’s invasion of Ukraine provoked a strong response from the US, the EU and other jurisdictions around the world, which imposed harsh sanctions aimed at isolating Russia from the international financial system. The sanctions were also aimed at preventing Russia and entities there from using crypto-assets to evade sanctions or to fight those who support hostile activities aimed at Ukraine.
Accordingly, the crypto industry faces numerous sanctions compliance obligations globally targeting Russia and Russia-related activities, and it is critical for crypto exchanges and financial institutions to understand the potential sanctions risks they may face from VASP partners.
For example, clients of a financial institution may attempt to purchase cryptoassets on exchanges located in Russia or located outside of Russia but serving the Russian market by offering to exchange bitcoins for rubles. After the Russian invasion of Ukraine, Elliptic identified more than 400 VASPs with a Russian nexus, many of which allow users to create accounts anonymously.
We will talk about this in more detail in our next report: “Cryptocurrency in Conflict: The Role of Cryptocurrencies in the Russia-Ukraine War”.
Financial Services for Law Enforcement EMEA
