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🇺🇸 OFAC Ransomware Cracking Target SUEX Crypto Exchange
September 21 US Treasury Office of Foreign Assets Control (OFAC) sanctioned cryptoasset exchange for the first time — the most significant sanctions watchdog action affecting the cryptoasset industry to date.
In an effort to crack down on networks that enable ransomware attacks, OFAC blacklisted SUEX OTC, an SRO that was incorporated in the Czech Republic but operated out of Russia and other locations, SUEX provided users with over-the-counter trading services through accounts it maintained at major cryptoasset exchanges.
Although SUEX tried to present itself as a legitimate business, it acted as a conduit for crypto-asset laundering, facilitating payments related to at least eight strains of ransomware, as well as other illegal transaction activities, according to OFAC.
As part of its action against SUEX, OFAC included 25 cryptoasset addresses belonging to the exchange, including bitcoin, ethereum and tether addresses, on its sanctions list. Elpitić’s analysis indicates that these addresses have received a total of approximately $934 million since 2018. OFAC believes that 40% of SUEX’s trading volume was illegal, suggesting that SUEX made as much as $370 million in illegal payments in just a few years.
As a result of OFAC’s sanctions, US individuals and companies may not transact with, or provide other services to, SUEX or any assets it owns and controls. Cryptoasset exchanges must therefore ensure that they do not process transactions with SUEX, and US banks must also ensure that they do not interact with it, including when clearing US dollar transactions with non-US banks. Non-US financial institutions also face risks of secondary sanctions if they assist SUEX in evading OFAC’s restrictions.
Targeting SUEX and denying it access to the US financial system sends a clear message: the US will not tolerate crypto-asset businesses that allow the ransomware threat to flourish. In addition to targeting, SUEX OFAC also updated its previous ransomware advisory — originally issued in October 2020 — to clarify the implications of ransomware-enabling sanctions.
At Elliptic, we’ve repeatedly highlighted the scope of the ransomware threat, related money laundering typologies, and the techniques ransomware attackers use to extort funds from victims. One of the key vulnerabilities that has allowed ransomware to flourish is unregulated and unregulated trading services where ransomware attackers can monetize their ill-gotten crypto assets.
Fortunately, regulated cryptoasset businesses and financial institutions can take steps to protect themselves from this threat. We at Elliptic offer blockchain analytics solutions to help regulated cryptoasset businesses and financial institutions comply with US and international sanctions, including those related to ransomware.
Our wallet viewing solution, Elliptical Lensand our transaction tracking solution, Elliptical Navigatorallow you to review the OFAC list to ensure you avoid dealing with blacklisted entities and addresses. Elliptic customers can review SUEX addresses in our solutions to ensure compliance.
Contact us for a demo and to learn more about how Elliptic’s leading blockchain analytics solutions can enable you to address the dual challenges of sanctions and ransomware.
🇺🇸 CFTC tells Congress it needs more cryptocurrency enforcement bodies
In a further sign that US regulators are keeping a close eye on cryptoassets, the Commodity Futures Trading Commission (CFTC) told Congress it needs more resources to expand its enforcement of activities in the cryptospace. In Congress testimony On September 21, CFTC Commissioner Dan Berkowitz said that if Congress wants the U.S. regulatory agency to expand its oversight of the cryptoasset space to cover new types of activity, then Congress should give the agency — which oversees cryptocurrency-based derivatives trading — more funding to could hire more enforcement officers. Like us noticed previously, the US had already established an aggressive enforcement posture vis-a-vis cryptospace: Regulatory fines against US crypto businesses for non-compliance already total more than $2.5 billion. The CFTC has been among the most aggressive US agencies when it comes to cryptocurrency enforcement, having recently stepped into the $100 million joint settlement with BitMEX. Commissioner Berkowitz’s remarks to Congress suggest the agency will not slow down its enforcement anytime soon. Cryptocurrency businesses and financial institutions that trade in crypto derivatives under the jurisdiction of the CFTC will have to ensure a high level of compliance with regulations.
🇺🇸 Biden set to nominate Bitcoin skeptic to lead OCC
On September 23, the media reported discovered that US President Joe Biden plans to appoint a crypto-asset skeptic to head the Office of the Comptroller of the Currency (OCC): the lead regulator for the nation’s banks. President Biden will soon nominate Saule Omarova, who is currently a professor at Cornell University Law School, for the post of Comptroller of the Currency. Omarova was the main critic of big banks and called for an audit of inefficiencies in the current banking system. But so does she expressed skepticism about cryptoassets and questioned whether they offer a meaningful alternative to the mainstream financial sector. The announcement of her nomination comes as Acting Comptroller Michael Hsu he told the Blockchain Association that while cryptoassets are indeed a disruptive technology, many innovations in the space are of questionable utility.
At Elliptic, we believe that while regulatory scrutiny of the cryptoasset space is important, skepticism of this degree is unwarranted. As we wrote earlierprevious OCC guidance already offers important clarity for financial institutions that allows them to take action new innovations in space, such as a launch crypto custody services, while providing markets with confidence that there is significant regulatory oversight. To learn more about the OCC’s past activities in the cryptoasset space, see Elliptic’s January 2021. webinar with former Acting Comptroller Brian Brooks.
Global banks reject Basel rules on Bitcoin
This week, major global financial institutions stepped in to champion the need for innovation in the crypto-asset space. On September 20, Global Financial Markets Association (GFMA) — the organization representing the world’s largest banks — announced a letter pushing back suggestion of Basel Committee on Banking Supervision which sets out how banks should manage crypto-asset risks. The Basel Committee is the global standard for prudential regulation of banks — and its proposals earlier this year suggested that banks must face strict capital requirements to cover losses from any exposure to cryptoassets. While the GFMA letter welcomes the Basel Committee’s engagement on the subject, the group described the Basel proposals as “too conservative” and said the rules “may significantly slow down the kinds of technological improvements to market structures that banks can develop.” Instead of creating new prudential requirements for banks’ exposure to cryptoassets, the GFMA recommends that Basel leverage existing requirements for other types of risk exposure and consider the benefits of improved efficiency and transparency that cryptoassets can provide financial institutions.
At Elliptic, we welcome this proactive stance by major financial institutions to promote a solid foundation for responsible innovation in cryptoassets. To learn more about how your bank can embrace opportunities in cryptoassets while managing risks, watch our webinar What your bank wanted to know about cryptocurrency… But was afraid to ask.
🇹🇠Thai regulator approves real estate investment project based on Ethereum
In Thailand, regulators are showing a welcome openness to innovation in the crypto-asset space. On September 16, the Securities and Exchange Commission of Thailand issued a license to Fraction, a company that allows investors to buy fractional stakes in real estate and other assets tokenized on the Ethereum blockchain. The company is the first in Thailand to receive a license to promote Initial Fraction Offerings (IFOs). Thailand’s willingness to license innovators in the crypto-asset space is a positive move for the local industry, and it comes amid debates in the US over whether regulators are being too harsh in treating crypto-assets as securities.
🇦🇪 Dubai opens crypto trade
In another positive move by regulators, Dubai has been given the go-ahead to open crypto asset trading. On September 22, the Securities and Commodities Authority (SCA) of the United Arab Emirates made an agreement with the Dubai World Trade Center Authority that will allow cryptoasset trading to take place in Dubai. Abu Dhabi Adjacent Global Market (ADGM) is already an important innovator in the cryptoasset space with proactive regulatory approach. By authorizing crypto asset trading in Dubai, the SCA, which oversees Dubai’s stock markets, will help improve Dubai’s competitiveness as a leading financial center. To learn more about regulatory approaches to cryptoassets in the Middle East region, see our Webinar in May 2021 with Waqar Chaudry from ADGM’s Finance and Regulatory Authority.
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