U.S. Treasury urges financial firms to scrutinize Russian crypto transactions

FinCEN reminded financial institutions in the U.S. that have visibility into cryptocurrencies and or CVCs to report any activity they suspect could be used by Russia as a way to evade sanctions.

U.S. Treasury urges financial firms to scrutinize Russian crypto transactions

The United States Financial Crimes Enforcement Network, or FinCEN, a branch of the Treasury Department, has warned financial institutions that crypto can be used to avoid sanctions imposed by the government of Russia because of its military action in Ukraine.

On Monday, FinCEN reminded financial institutions in the U.S. that have visibility into cryptocurrencies and convertible virtual currencies, or CVCs, to report any activity they suspect could be used by Russia as a way to evade sanctions.

Although the U.S. watchdog said CVCs cannot be used by the Russian government to evade large-scale sanctions, financial institutions were obligated to report the activities of Russian and Belarussian individuals involved in what many have called "economic warfare."

"With escalating pressure from the U.S. economy on Russia, it is vital that U.S. financial institutions remain vigilant against potential Russian sanctions evasion by both oligarchs and state actors," stated Him Das, the acting director of FinCEN since August 2021. "In spite of the limited use of methods such as cryptocurrency to circumvent sanctions, prompt reporting of suspicious activity contributes to our national security and our efforts to support Ukraine and its people."

U.S. lawmakers and agencies have expressed concern about possible attempts by individuals and banks in Russia to evade the sanctions announced by President Joe Biden on Feb. 24.

The U.S. Treasury Department's Office of Foreign Assets Control (OFAC), tasked with administering and enforcing U.S. sanctions, warned residents on Feb. 28 not to benefit Russia's central bank or government by using digital currencies.

Crypto transactions are deemed "deceptive or structured transactions or dealings," according to OFAC guidelines.

Legislators in the EU and U.S. have also been raising concerns about the possibility of Russia using crypto assets as its options dwindle amid being cut off from SWIFT and having many of its banks listed on sanctions lists.

Ukraine's minister of digital transformation, Mykhailo Fedorov, had requested on social media that cryptocurrency exchanges block addresses of Russian users. Binance and Kraken, among others, have stated that they will not unilaterally restrict access to their coins in Russia, unless it becomes mandated by law.