U.S. Treasury issues sanctions on virtual currency mixers
Since May 2022, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned two virtual currency mixers in an effort to combat money laundering and terrorism financing.
The Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said, “Virtual currency mixers that assist illicit transactions pose a threat to U.S. national security interests. We are taking action against illicit financial activity by the DPRK and will not allow state-sponsored thievery and its money-laundering enablers to go unanswered.”
To date, OFAC has sanctioned two mixing service providers, including Blender.io in May 2022 and Tornado cash in August 2022. Both of these service providers indiscriminately facilitate anonymous transactions by hiding their origin, destination, and counterparties with no attempt to determine their origin. While the alleged purpose is to increase privacy, mixers like Blender.io and Tornado Cash are commonly used by illicit actors to launder funds. For example, since 2019 Tornado cash has been used to launder more than $7 billion worth of virtual currency. This includes over $455 million stolen by the Lazarus Group, a Democratic People’s Republic of Korea (DPRK) state-sponsored hacking group that was sanctioned by the United States. In 2019, this was the largest known virtual currency heist to date.
For more information on these sanctions please view the following United States Department of the Treasury press releases:
- U.S. Treasury Sanctions Notorious Virtual Currency Mixer Tornado Cash
- U.S. Treasury Issues First-Ever Sanctions on a Virtual Currency Mixer, Targets DPRK Cyber Threats
What does this mean for me?
Australians continue to show interest in adopting and using digital currencies. Due to the pseudo-anonymous and borderless nature of digital currencies criminals may attempt to take advantage of digital currencies, including mixing services, to commit crimes and hide from law enforcement.
To address this, AUSTRAC has released a financial crime guide about ‘Preventing the criminal abuse of digital currencies’. You can view the behavioural patterns and financial indicators provided in this report to identify whether you need to carry out additional customer checks (enhanced customer due diligence) and if a suspicious matter report (SMR) needs to be submitted to AUSTRAC.
For more information on SMRs and your reporting obligations, please see the suspicious matter reports page.