FinCEN Issues Red Flags To Financial Institutions Regarding Possible Russian Sanctions Evasion Attempts

FinCEN

On Monday, the Financial Crimes Enforcement Network (FinCEN) issued a notice urging enhanced vigilance against attempts to dodge Russian sanctions by utilizing cryptocurrencies and other virtual currencies.

FinCEN Will Not Allow Russia To Use Crypto

The advisory included a list of red flags to help identify possible sanctions evasion. It also reminded financial institutions of their responsibilities under the Bank Secrecy Act, including reporting transactions involving convertible virtual currencies, a phrase used by FinCEN to encompass cryptocurrencies and other digital assets. The Financial Crimes Enforcement Network (FinCEN) issued a FinCEN Alert, warning all financial institutions to be on the lookout for any attempts to circumvent the wide sanctions and other US-mandated limitations imposed in response to Russia’s continued invasion of Ukraine. 

The advisory includes instances of red flags to help identify suspected sanctions evasion behavior and reminds financial institutions of their Bank Secrecy Act reporting duties.

The US, its main partners, and worldwide allies have put unprecedented economic pressure on Russia and Belarus. As a result, sanctions evasion may take place in a variety of ways, including through presently sanctioned Russian and Belarusian banks or other financial organizations with some connection to the international financial system.

While large-scale sanctions evasion by a government like the Russian Federation using convertible virtual currency (CVC) is unlikely, CVC exchangers and administrators, as well as other financial institutions, may observe attempted or completed money transfers tied to CVC wallets or other CVC activity associated with sanctioned Russian, Belarusian, and other affiliated persons. FinCEN also warns financial institutions about the hazards of Russian-linked malware activities.

All financial institutions, including those with visibility into cryptocurrency or CVC flows, such as CVC exchangers and administrators, should identify and report suspicious activity related to potential sanctions evasion as soon as possible, and conduct appropriate risk-based customer due diligence or enhanced due diligence as needed. Financial institutions are likewise advised to make full advantage of Section 314(b) of the USA PATRIOT Act’s information-sharing powers.

The US Department of Justice, international allies, and task-forces created to follow and freeze the assets of Russian elites will all get relevant information to aid law enforcement investigations.

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