The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a new round of sanctions against crypto-related companies with ties to Russia. The measure is part of the U.S. government’s efforts to crack down on OFAC-designated entities evading sanctions through virtual asset services.
OFAC designates crypto companies linked to Russia
The U.S. Treasury Department recently designated 13 entities and 2 individuals, accusing them of facilitating transactions and providing cryptographic services to help it "evade sanctions."
The new designation targets companies that serve Russia’s core financial infrastructure and operate in the “financial services and technology sectors of the Russian Federation’s economy.”
The list includes Russian individuals and individuals with ties to Russia who develop and provide virtual asset services that “enable OFAC-designated entities to evade U.S. sanctions.”
The move prohibits transactions and interactions between all designated entities and U.S. individuals. This is part of OFAC and G7 efforts to combat designated parties’ evasion of sanctions and export control measures.
Brian E. Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, explained:
Russia has increasingly turned to alternative payment mechanisms to circumvent U.S. sanctions and continue to fund its war against Ukraine. As the Kremlin seeks to exploit entities in the fintech space, the Treasury Department will continue to expose and disrupt companies seeking to help sanctioned Russian financial institutions reconnect to the global financial system.
On-chain data reveals Bitpapa and Netex24 aiding sanctions evasion
Blockchain research firm Chainalysis has released a report analyzing two entities newly designated by OFAC: Netex24, a Moscow-based fintech company that operates a crypto exchange, and Bitpapa, a company that facilitates payments for Russian crypto businesses Peer-to-peer (P2P) exchanges, these companies are all on OFAC’s list.
The two companies have brokered significant transactions for sanctioned entities over the past two years, the report said.
The company identified “clusters related to these two services” through on-chain data. The report specifically pointed out that exchanges and darknet markets that did not implement "know your customer" (KYC) procedures accounted for a large part of these companies' trading history.
The transactions included Russian-language websites offering deposits and withdrawals to sanctioned Russian banks. Both companies have seen significant outflows of funds being used for seemingly illegal purposes.
According to Chainalysis data, from October 2019 to March 2024, Bitpapa’s outflows to sanctioned entities accounted for 52% and 32.6% to darknet markets. At the same time, Netex24’s outflows to the darknet market accounted for 46.7% and 23.4% to sanctioned entities.
Since the start of Russia's war in Ukraine in 2022, the cumulative value sent by these companies to sanctioned parties has increased. As shown in the chart above, both darknet market transactions and transactions by sanctioned entities have increased since the second half of 2023, exceeding $75 million.
According to the report, the two entities transferred millions of dollars worth of cryptocurrencies to the Hydra market and crypto exchange Garantext. Additionally, these companies facilitated transactions for multiple pro-Russian militia and propaganda groups, including OFAC-designated MOO Veche.
The U.S. government has stepped up its crackdown on entities that circumvent sanctions through crypto-related services. As part of the ongoing efforts, sanctions were imposed in January this year on platforms that facilitated crypto trading in connection with promoting the terrorist organization Hamas.
Additionally, the United States has cracked down on cryptocurrency mixers where criminals misuse these privacy tools, including a ban on Tornado Cash and its founder, which has caused concern in the crypto community. #美国财政部 #俄罗斯制裁
