UK asks crypto exchanges to report suspected sanctions violations
Cryptocurrency exchanges are now being asked to report suspected sanctions violations to UK authorities under new rules recently introduced amid concerns that cryptos are being used to evade restrictions imposed in response to Russia’s invasion of Ukraine.
The Guardian media reported the matter on Sunday, citing the updated official guidance from HM Treasury’s Office of Financial Sanctions Implementation (OFSI) on 30 August. The regulator explicitly included cryptocurrencies and other valuable digital assets such as non-fungible tokens (NFTs) among those that must be frozen if sanctions are imposed on an individual or company.
The rules set by the regulator now mean that crypto exchanges are committing a criminal offense if they fail to report customers who have been singled out for sanctions.
According to the latest regulation, crypto exchanges must act immediately if they suspect that one of their clients is under sanctions or if they suspect a violation of sanctions.
The new policy has given similar exchange obligations to professionals such as real estate agents, accountants, lawyers and jewelers.
Economic sanctions against individuals and firms linked to Vladimir Putin’s regime have been among Britain’s most prominent responses to the Ukraine invasion.
Targets of sanctions have included Russian oligarchs and relatives with direct interests in cryptoassets, including Vladimir Potanin, Said Gutseriev and Oleg Deripaska, among others.
In April, cryptocurrency exchange Binance blocked the accounts of relatives of Russian politicians, including Polina Kovaleva, the stepdaughter of Russian Foreign Minister Sergei Lavrov, and Elizaveta Peskova, the daughter of Putin’s spokesman, Dmitry Peskov.
This came as a response from the Western powers led by the US, UK and EU which imposed unprecedented economic sanctions against Russia. During that time, there were fears that Russian companies were considering using cryptocurrency for international payments to avoid sanctions.
Using crypto to avoid sanctions and move money around the world was already illegal under UK law. However, the new changes underscore the authorities’ concern that the new asset class could be used to evade sanctions because users do not rely on regulated entities to make transactions.
Whether Russia might try to use cryptocurrencies to avoid sanctions has been an open discussion since March of this year. And decentralized finance (DeFi) and decentralized exchange (DEX) platforms are seen as particularly vulnerable.
Cryptocurrencies have already been used to avoid sanctions in Iran and North Korea.
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