FinCEN Adds Cryptocurrency to Warning About Russian Sanctions Evasion

The U.S. Financial Crimes Enforcement Network (FinCEN), an agency of the U.S. Treasury Department, has warned financial institutions to view cryptocurrencies as a possible means by which Russia is trying to circumvent sanctions related to the country’s military operations in Ukraine.

In Monday's warning, FinCEN reminded U.S. financial institutions "aware of cryptocurrencies" and convertible virtual currencies (CVCs) to report any activity that could be considered a potential way for Russia to evade sanctions imposed by the U.S. and its allies. While the U.S. watchdog said it was "not necessarily feasible" for the Russian government to use CVCs to evade massive sanctions, financial institutions are obliged to report such activity from Russian and Belarusian individuals.

Him Das, acting director of FinCEN since August 2021, said: “In the face of growing economic pressure from Russia, it is critical for U.S. financial institutions to remain vigilant about possible sanctions evasion by Russia, including state actors and oligarchs. Although we We do not see widespread use of methods such as cryptocurrencies to evade sanctions, but timely reporting of suspicious activity contributes to our national security, and our efforts to support Ukraine and its people."

Many U.S. lawmakers and institutions have publicly said that individuals and banks in Russia may be trying to use cryptocurrencies to evade sanctions announced by U.S. President Joe Biden on Feb. 24. On Feb. 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC, the agency responsible for administering and enforcing U.S. sanctions) warned U.S. residents against using digital currencies to benefit the Russian government or central bank. OFAC’s guidelines equate crypto transactions with “deceptive or structured transactions.”

Lawmakers in the U.S. and the European Union have also been calling attention to the potential use of crypto assets in Russia, as the country has fewer options as it is cut off from the SWIFT payments network and its major banks are placed on sanctions lists. Bloomberg reported Monday that President Joe Biden will sign an executive order sometime this week creating a comprehensive cryptocurrency regulatory framework in response to the escalating military situation in Ukraine.

Ukraine’s Minister of Digital Transformation Mykhailo Fedorov directly appealed to cryptocurrency exchanges on social media, urging them to block the addresses of Russian users. However, many exchanges, including Binance and Kraken, said they would not act unilaterally to block all users in Russia from accessing their cryptocurrencies unless required by law.

I ask all major cryptocurrency exchanges to block addresses of Russian users.

It is critical to not only freeze addresses related to Russian and Belarusian politicians, but also to compromise the addresses of ordinary users.

— Mykhailo Fedorov (@FedorovMykhailo) February 27, 2022

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