On Thursday, the blockchain analysis firm Elliptic published its 2021 Sanctions Compliance in Cryptocurrencies report describing trends in crypto compliance — and avoidance.
Ever since the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) first sanctioned two bitcoin addresses in 2018, blacklisted wallets have received more than $175 million in BTC and ETH as of the report’s publication.
As the report finds, financial criminals have increasingly attempted to sidestep through the following methods: obscuring the origins of illicitly gained crypto through mixers, privacy coins and privacy wallets; using unregulated exchanges to avoid know-your-customer information; and increasingly becoming involved in crypto mining.
“As sanctioned actors increasingly interact with the crypto space, compliance officers need to be alert to the likelihood of increased exposure to these parties,” Elliptic wrote in the report.
Crypto companies can avoid unwittingly interacting with sanctioned wallets by screening wallets before a transaction to spot suspicious prior activity, the report finds. In addition, keeping in mind red flags, such as when a customer engages in indirect transactions for no apparent reason, can alert compliance officers to potential financial criminals.
With compliance a major concern, many crypto firms have beefed up their compliance team over the past year. Prominent crypto firms like BitMEX and BitGo made strategic hires to their compliance executives in October 2020 and January 2021, respectively.