On November 8, 2021, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) designated a virtual currency exchange, Chatex, and its infrastructure support providers on the list of Specially Designated Nationals and Blocked Persons (SDN List) for their role in facilitating financial transactions for ransomware actors.[i] The Financial Crimes Enforcement Network (FinCEN) also released an updated advisory on ransomware and the use of the financial system to facilitate ransomware payments.[ii] These actions were taken in furtherance of a coordinated “whole-of-government” effort to disrupt criminal ransomware actors and the virtual currency exchanges used to launder ransom payments around the world.
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OFAC Issues Sanctions Guidance to Virtual Currency Industry
On October 15, 2021, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued “Sanctions Compliance Guidance for the Virtual Currency Industry” (the “Guidance”). The Guidance follows recent guidance and advisory letters directed to the virtual currency industry relating to the risk of facilitating ransomware payments[1] and is OFAC’s most comprehensive virtual currency-specific advisory to date. In particular, the Guidance directly addresses some simpler interpretive questions, discusses sanctions compliance programs and “best practices,” and provides hints about OFAC’s enforcement priorities going forward.
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OFAC Updates Ransomware Advisory and Sanctions Virtual Currency Exchange
On September 21, 2021, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC): (i) issued an updated advisory on potential sanctions risks for facilitating ransomware payments; and (ii) designated SUEX OTC, S.R.O. (SUEX), a virtual currency exchange, on the list of Specially Designated Nationals and Blocked Persons (SDN List) for its role in facilitating financial transactions for ransomware actors.[1] These actions demonstrate the U.S. government’s increasing focus on virtual currencies as a key means of facilitating ransomware payments and related money laundering, as well as OFAC’s commitment to combating ransomware attacks and other malicious cyber activities.
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Cryptocurrency and Other New Forms of Financial Technology: Potential Terrorist Financing Concerns and Liability
While large financial institutions have traditionally been hesitant to enter new areas of financial products, particularly virtual assets, many more banks and companies have expressed interest in virtual currencies as cryptocurrency has become increasingly mainstream. Given the use of such services by terrorist groups, it is important for banks and other financial institutions to consider
OFAC Settles with Digital Currency Payment Processor for Sanctions Violations
On February 18, 2021, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) announced a $507,375 settlement with BitPay, Inc. (BitPay), a payment processor for merchants accepting digital currency as payment for goods and services, for 2,102 apparent violations of multiple sanctions programs between 2013 and 2018.[1] The settlement highlights that financial service providers facilitating digital currency transactions must not only establish sanctions compliance programs to screen their own customers but also must monitor third-party non-customer transaction information.
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