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US Treasury Department attacks Russian companies using blockchain to evade sanctions

The use of blockchain by these companies may challenge traditional sanctions enforcement mechanisms, prompting authorities to act more forcefully.

Date: 2024-03-26 Author: Łukasz Michałek
US Treasury Department attacks Russian companies using blockchain to evade sanctions

The U.S. Office of Foreign Assets Control (OFAC) on Monday imposed sanctions on 13 entities and two individuals. They are accused of developing cryptocurrency-related services that could make it easier for Russian citizens to evade sanctions.

OFAC’s designation is aimed at limiting Russia’s use of the global financial system in its conflict with Ukraine. Brian Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, said in a statement:

“Russia is increasingly turning to alternative payment mechanisms to bypass U.S. sanctions and continue to finance its war against Ukraine. The Treasury Department will continue to expose and disrupt companies that seek to help sanctioned Russian financial institutions reconnect to the global financial system.”

OFAC rules generally prohibit U.S. individuals from conducting transactions with designated entities within the United States. Financial institutions and other entities are required to comply with these sanctions to avoid serious consequences. Contacting sanctioned parties through transactions can lead to serious consequences.

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US Treasury Department allegations against Netex24 and Bitpapa

B-Crypto, Netex24, Tokentrust Holdings, Bitpapa and Crypto Explorer are among the newly sanctioned entities. According to OFAC, the listed companies developed or operated blockchain services in Russia. The agency alleges that Netex24 and Bitpapa used cryptocurrencies to transact with sanctioned banks, cryptocurrency exchanges and Darknet markets.

Separately, Chainalytic published a blog detailing the activities of the sanctioned entities. The report shows that Netex24 and Bitpapa allegedly facilitated transactions for several pro-Russian militia and propaganda groups. These include an OFAC-designated militia group called MOO Veche. According to Chainalytics, the entities operate in regions such as Donetsk, Lugansk and Crimea in Ukraine.

The US government is stepping up scrutiny of crypto activity

Over the past two years, the U. S. government has been focusing more strongly on cryptocurrencies. OFAC’s latest actions are a result of this intense focus. The bureau has imposed sanctions on cryptocurrency traders who assisted the Lazarus group in North Korea’s conversion of millions of dollars of cryptocurrencies into fiat currency.

In January, OFAC intervened against networks linked to the Palestinian militant group Hamas and placed them under a fifth round of sanctions. The action was taken in response to Hamas attacks on Israel last October.

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Łukasz Michałek
Łukasz Michałek
Founder of the rapidly developing cryptocurrency channel "Biblia Kryptowalut" on YouTube. He also co-creates the Arena Trading group with Marek. Łukasz is fascinated and passionate about blockchain technology and cryptocurrencies, which constitute the central element of his activity in the cryptocurrency industry.
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