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OFAC Virtual Currency Guidance Brochure

INTRODUCTION

Virtual currencies are beginning to play an increasingly prominent role in the global economy. The growing prevalence of virtual currency as a payment method likewise brings greater exposure to sanctions risks—like the risk that a sanctioned person or a person in a jurisdiction subject to sanctions might be involved in a virtual currency transaction.

Accordingly, the virtual currency industry, including technology companies, exchangers, administrators, miners, wallet providers, and users, plays an increasingly critical role in preventing sanctioned persons from exploiting virtual currencies to evade sanctions and undermine U.S. foreign policy and national security interests.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is issuing this guidance to assist the virtual currency industry in mitigating these risks. OFAC sanctions compliance obligations apply equally to transactions involving virtual currencies and those involving traditional fiat currencies.

Members of the virtual currency industry are responsible for ensuring that they do not engage, directly or indirectly, in transactions prohibited by OFAC sanctions, such as dealings with blocked persons or property, or engaging in prohibited trade- or investment-related transactions. This guidance will assist those in the virtual currency industry in:

OFAC Sanctions Involving Virtual Currency

In recent years, OFAC sanctions have increasingly targeted individuals and entities that have used virtual currency in connection with malign activity.  For example, on March 2, 2020, OFAC sanctioned two Chinese nationals involved in a North Korean state sponsored money-laundering scheme. 

The individuals received approximately $100 million in virtual currency stolen from cyber intrusions against two virtual currency exchanges and began layering the funds in complex transactions to include purchasing over $1 million in digital music gift cards. More recently, on September 21, 2021, OFAC designated a Russian virtual currency exchange for facilitating financial transactions for ransomware actors. 

Based on analysis of known transactions, over 40 percent of the exchange’s transaction history had been associated with illicit actors, involving the proceeds from at least eight ransomware variants.  As sanctioned persons and countries become more desperate for access to the U.S. financial system, it is vital that the virtual currency industry prioritize cybersecurity and implement effective sanctions compliance controls to mitigate the risk of sanctioned persons and other actors exploiting virtual currencies to undermine U.S. foreign policy interests and national security.

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Zaher Fallahi, Crypto Tax Attorney, Crypto Tax CPA

Zaher Fallahi, cryptocurrency tax attorney, CPA, advises crypto owners with crypto tax, crypto FBARs, crypto FATCAs, crypto offshore accounts, and crypto foreign gifts. Nationwide virtual appointments are available @ toll free 1-(877) 687-7558. taxattorney@zfcpa.com