Financial Sanction Evasion with Crypto – Here’s How to Stop it
What can law enforcement and government agencies do to reveal individuals circumventing sanctions with crypto?
New sanctions against Russia have prompted individuals and companies to illegally use cryptocurrencies to bypass regulations. This primer describes how crypto can be used to evade sanctions – and what you can do to stop it.
The sanctions on Russia
As the situation in Europe escalates, Western countries and organizations are enacting new financial measures and sanctions on Russia and Russian elites. In late February, in a joint statement, France, Germany, Italy, the UK, Canada, and the US condemned Russian aggression and committed to financial restrictions against the Russian financial system, as well as specific people and entities.
Indeed, the sanctions were immediate and comprehensive: For example, the European union announced new packages of sanctions against Russia, including restricting access to the EU’s capital, financial markets and services, as well as banning transactions with the Russian Central Bank and banning seven Russian banks from the SWIFT system, a key component for the global payments system. The restrictive measures include an asset freeze and funding restrictions against Russian individuals.
US also announced that they would impose restrictive measures aimed at Russia’s Central Bank, cutting off US transactions with the central bank and effectively prohibiting business with the bank as well as a freeze on its assets within the US.
The crypto alternative to bypass sanctions on Russia
In this climate of growing sanctions, it’s no wonder why targeted individuals may wish to move their wealth into cryptocurrencies. This unregulated alternative can easily and promptly enable global commerce – exactly what the sanctions aim to block – as it bypasses the control points on which governments rely, mainly transfers of money by banks, without detection. Moreover, they are not likely to be easily seized.
As a result, cryptocurrencies pose an increasing threat to law enforcement.
EU officials admit that cryptocurrencies could be used by criminal actors to circumvent the sanctions.
What can law enforcement and government agencies do to stop individuals circumventing sanctions with crypto?
To address the raising concern of sanction evaders leveraging cryptocurrency as an alternative to bypass sanctions, law enforcement agencies and governmental task forces should be fully empowered with the most innovative and cutting-edge blockchain analytics solutions.
While all cryptocurrency transactions are recorded on the blockchain, their makers’ identities are considered anonymous or pseudo-anonymous. To add another layer of complexity, it is reported that new tools developed in Russia can obscure money trails and mask the origin of such transactions. An advanced solution is needed in order to overcome these challenges and identify sanctions evaders and related criminal misconduct.
Cognyte’s blockchain analytics platform is a world-class cryptocurrency analytics and de-anonymization solution. This groundbreaking, patent pending technology delivers crypto-centric intelligence driven by collecting and fusing siloed data sources. The solution uses multiple approaches, including open-source analytics for tagging services and malicious addresses, blockchain analytics to track blockchain transactions, and additional sources and techniques.
Cognyte’s solution thus provides de-anonymization of illicit transaction makers, such as sanction evaders, with zero dependence on third parties, such as collaborative exchanges, wallet vendors or financial institutions, and with no dependency on their willingness to comply with new regulations.
To find out how you can uncover sanction evaders, book your demo now.