Crypto-currency companies have begun self-reporting suspected breaches of sanctions against Russia to the UK Government, with three out of 50 self-reports originating from crypto firms, shows new data from multinational law firm Pinsent Masons.
Other financial services companies (i.e. non-crypto) have been the most active reporters of suspected breaches of sanctions against Russia. 38 financial services firms self-reported breaches from Feb 1 2023 to Dec 31 2024.*
The Office of Financial Sanctions Implementation (OFSI) requires crypto asset exchanges and crypto-currency wallet business to provide information if they suspect a breach of sanctions or if they hold funds for a person who is on the UK sanctions list.
The UK’s current sanctions list contains details on a number of crypto wallets that are subject to sanctions. Crypto wallets allow direct peer to peer transactions between users, outside of the banking system and as wallet addresses are pseudonymous, the ultimate beneficial owner can be difficult to ascertain.
Many sanctioned individuals, both on the UK and US sanctions list are known to use crypto-exchanges and wallets as a way of avoiding the more rigorous screening and monitoring checks carried out by regulated banks.
Hinesh Shah, Partner and Forensic Accountant at Pinsent Masons, says that the self-reporting of sanction breaches by crypto firms suggests that the FCA’s decision to allow crypto firms to register with the FCA may be paying dividends. Crypto firms that are registered with the FCA are likely to have more stringent Anti Money Laundering (AML) and Know Your Customer (KYC) processes – making the identification and reporting of sanction breaches more likely.
Hinesh adds: “It is widely known that crypto currencies are being used to evade sanctions. It is good to see that some UK based crypto firms are taking the problem seriously. Crypto firms operating in stricter regulatory and legal frameworks are much more likely to take their obligations seriously.”
“Regulators have a history of fining aggressively when it comes to fines for breaches of AML or KYC, meaning UK based crypto firms need to take this seriously.”
Recent fines for breaches of AML include a US cryptocurrency exchange, which was fined $4.3 billion by US officials for failing to take measures against money laundering and breaches of international sanctions.**
Breach of Russian sanctions forces crypto firms to self-declare breaches
*Self reports made from February 1 2023 to December 31 2024
**US Department of Justice (DOJ): November 2023
