Regulators are raising concerns about sanctioned individuals and entities attempting to utilize cryptocurrency assets for fund movements, particularly in evasion of sanctions. The Cyprus Securities and Exchange Commission (CySEC) issued a notice urging all regulated entities to be vigilant regarding such evasion attempts, especially highlighting the potential use of cryptocurrencies in these activities.
This notice follows a directive from the Cypriot financial market supervisor about a month ago, instructing regulated entities to implement restrictive measures on entities and individuals related to Russia and sanctioned by the European Union.
CySEC’s attention was drawn to a paper by the United States Financial Crimes Enforcement Network (FinCEN), published on March 7, which outlined various attempts by Russians to evade sanctions. The paper emphasized the misuse of the financial system through corporate vehicles, shell companies, and third parties to conceal the identities of sanctioned individuals.
Notably, sanctioned Russians are exploring the use of convertible virtual currencies for these purposes. Transactions involving these currencies often originate from or are sent to non-trusted Internet Protocol (IP) addresses, mostly located in Russia and Belarus. These individuals use exchanges or foreign Money Service Businesses (MSBs) in jurisdictions with inadequate anti-money laundering systems.
CySEC also highlighted the United Kingdom financial regulators’ warning, emphasizing that the use of crypto assets for evasion is as illegal as the use of other regulated financial assets. Regulated entities are thus mandated to take measures to mitigate the risk of sanctions evasion via crypto assets, including implementing additional sanctions and specific controls. The regulator urges entities to be attentive to red flag indicators during due diligence measures, especially in the ongoing monitoring of accounts and transactions.
Source: https://www.cysec.gov.cy/CMSPages/GetFile.aspx?guid=175e7db7-bfa5-473f-b93a-fd07368e1d2c