OFAC Scrutinizing Cryptocurrency Transactions

The Workplace of Overseas Belongings Management (“OFAC”) of the U.S. Treasury Division administers and enforces financial and commerce sanctions primarily based on U.S. overseas coverage and nationwide safety objectives towards overseas governments and different threats to nationwide safety, overseas coverage, and threats to nationwide safety. OFAC laws prohibit partaking in transactions with “blacklisted” overseas governments, corporations, and people designated on its sanctions record.

The Workplace of Overseas Belongings Management

Whereas at first blush it might seem that OFAC focuses its scrutiny on its “Country List,” which incorporates such international locations as Iran, North Korea, Ukraine-Russia, amongst others, its attain consists of foreign money and cryptocurrency transactions that contain sanctioned events. With the rising progress of cryptocurrency and blockchain transactions, crypto and blockchain companies have been swept up into OFAC’s scrutiny. Given the character of blockchain know-how, it’s tough for these corporations to determine and stop transactions that would implicate sure events that may be on OFAC’s Nation Checklist.

Several companies over the past few years have run afoul of transactions involving governments, corporations, and/or people on the Nation Checklist which have used digital foreign money, digital wallets, or software program to handle digital foreign money transactions, together with BitGo, Inc., BitPay, Inc., and Exodus Motion, Inc. Though BitGo, BitPay, and Exodus Motion every took remediating measures to resolve their enforcement actions with OFAC, as did Exodus Motion in its voluntary disclosure and response to OFAC’s administrative subpoena, these corporations and cryptocurrency and bitcoin transactions stay topic to persevering with scrutiny and enforcement actions by OFAC.

Cryptocurrency Transactions Underneath Scrutiny

Given the strict legal responsibility normal that OFAC imposes for violations of U.S. financial sanctions together with the doctrine of “implicit constructive information” of the events concerned, it behooves these engaged in cryptocurrency and bitcoin transactions to develop and implement sturdy due diligence and involved-party vetting course of in addition to a devoted self-audit program to determine any violations and each to appropriate them and to have the ability to self-report to OFAC within the curiosity of mitigating any doable sanctions.