In a recently unsealed court document from the US, the judge quoted comedy show, Saturday Night Live, in support of his unequivocal finding that sanctions do apply to cryptocurrency.
The opinion will mean that the US Department of Justice (DoJ) can proceed in prosecuting the, currently anonymous, operator of a payment platform who allegedly breached US financial sanctions using cryptocurrency. It is understood to be the DoJ’s first criminal prosecution involving the alleged use of cryptocurrency to evade US sanctions.
Whilst the judge found it clear that cryptocurrency and cryptoplatforms come within the scope of financial sanctions, he flagged the misconception that cryptoassets were both untraceable and outside the ambit of sanctions laws. Highlighting the pervasiveness of the misconception that crypto provided some sort of safe haven from law enforcement, the subject of this allegation actually advertised that the payments platform could circumvent US sanctions. A strap-line he may have written in haste but have the chance to repent on at leisure.
In support of his opinion, the judge quoted the Office of Foreign Assets Control’s recent guidance which confirmed that “sanctions compliance obligations apply equally to transactions involved virtual currencies and those involving traditional fiat currencies”. He also, somewhat unusually, quoted Saturday Night Live to drive-home that virtual currency is not untraceable and that sanctions do apply to virtual currency.
This conclusion mirrors the position in the UK, as outlined recently in a joint statement released by three UK regulators. The FCA, the Office of Financial Sanctions Implementation (OFSI) and The Bank of England jointly issued a statement in March 2022, that “all UK financial services firms, including the cryptoasset sector, are expected to play their part in ensuring that sanctions are complied with”. The statement went on to say that “financial sanctions regulations do not differentiate between cryptoassets and other forms of assets”. OFSI has also made it abundantly clear in its guidance that crypto assets are caught by financial sanctions restrictions.
Time will tell whether the misconception will result in more work for law enforcement as would-be sanctions evaders are caught out.