UK orders crypto exchanges to report sanctions breaches

The UK Treasury's Office of Financial Sanctions Implementation (OFSI) has updated its guidance on sanctions to include crypto exchanges. 

Financial sanctions have received greater attention this year following Russia's invasion of Ukraine, which saw countries including the UK slap restrictions on interactions with Russian entities. They are put in place to achieve foreign policy or national security goals and can range from targeted asset freezes to restrictions on financial services. 

While banks and financial services firms have been facing strict Russian sanctions requirements for months, cryptocurrency exchanges must now also comply, according to updated documents from the OFSI. The Guardian first reported the change in OFSI’s guidance, which was implemented on August 30. 

Exchanges must report any suspected breach to the OFSI and freeze funds or face criminal charges or financial penalties, according to the updated document. Custodian wallet providers are also subject to reporting obligations, as per the sanctions guidelines. 

The UK Financial Conduct Authority (FCA) said in March that crypto exchanges must play their part in ensuring sanctions are complied with. The agency also provided guidance on how to comply. 

It was already illegal to evade sanctions using cryptocurrencies due to UK laws that cover all “economic resources.” This change focuses instead on the entities that enable transactions.

“These new requirements will cover firms that either record holdings of or enable the transfer of cryptoassets and are therefore most likely to hold relevant information,” a UK Treasury spokesperson told The Guardian.