By Debra Eshbaugh, CAMS, Senior Manager of Strategy and Evangelism, Banker’s Toolbox 

Digital currency sanctions list

Digital Currency makes it to the Sanctions Lists

Digital currency addresses linked to online wallets have been added to the Specially Designated Persons List in response to charges brought by the U.S. Justice Department against an Iranian hacking cell. This joint action between the Justice Department and the U.S. Treasury Department marks the first time digital currency identifiers have been added to flag targets on the Sanctions List.

Under Secretary Sigal P. Mandelker reinforced the importance of these sanctions in her keynote address at the recent ABA Financial Crimes Conference stating, “Just as we are focused on promoting innovation by the private sector, we are also keenly aware that emerging technologies, such as virtual or digital currencies, can be used for nefarious purposes…As Iranian and other bad actors attempt to misuse digital currency to facilitate illicit activity, financial institutions, including exchangers and other providers of digital currency services, must guard against the risks of assisting these malicious actors.”

The digital currency addresses, which include the unique alphanumeric identifier and the corresponding digital currency, are associated with over 7,000 transactions processed by two individuals that allegedly laundered millions of dollars’ worth of bitcoin gained from the SamSam ransomware scheme. Through the scheme, the cell extorted over $6 million dollars from 200+ victims dating back to December 2015. Among the victims were the Atlanta city government, Colorado Department of Transportation and educational institutions, including the Mississippi Valley State University, bringing the economic damage to over $30 million.

Why is this newsworthy? One of the key attractions/selling points of using digital currency is that the users’ identities are supposed to be private. By adding the specific digital wallet addresses and their named owners to the list, OFAC called that level of privacy into question and also announced the extent to which the U.S. authorities are monitoring crypto market activity.

The U.S. Department of Treasury has added two FAQs; one regarding the additional sanctions against Iran, and the second to clarify that OFAC compliance obligations are the same regardless of the denomination of currency, be it digital currency or traditional fiat currency.

While it is not currently possible to query digital currency addresses using OFAC’s Sanctions List Search tool, the Treasury noted that … “each digital currency address listed on the SDN list will have its own field: the structure will always begin with ‘Digital Currency Address,’ followed by a dash and the digital currency’s symbol (e.g., ‘Digital Currency Address – XBT’, ‘Digital Currency Address – ETH’). This information is followed by the unique alphanumeric identifier of the specific address.”

And that… “parties who identify digital currency identifiers or wallets that they believe are owned by, or otherwise associated with, an SDN and hold such property should take the necessary steps to block the relevant digital currency and file a report with OFAC that includes information about the wallet’s or address’s ownership, and any other relevant details.”

For more information on this update to the Specially Designated Persons List and the associated FAQ, click below:

https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_iran.aspx#misc_fi

https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_compliance.aspx#646

https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20181128.aspx

– Debra Eshbaugh, CAMS

Eshbaugh has over 30 years’ experience in the financial industry. She spent 10 years working extensively within Retail Banking and Consumer Lending before moving to Bank Operations. During her 20 years in operations, she managed several areas including Deposit and Retirement Operations, Item Processing, ATM/Cards, Retail & Commercial Cash Vaults and Armored Transport. She joined Banker’s Toolbox as a Product Manager for the BSA/AML product suite in 2010. In 2018, Debra became a Senior Manager of Strategy and Evangelism, providing actionable insights to support long-term company strategy based on analysis of market and industry trends, competitor developments, financial and regulatory technology changes and exploration and evaluation of potential partnerships. Eshbaugh continues to serve as a spokesperson and subject-matter expert in BSA/AML typologies and regulatory requirements as well as product offerings.