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FinCEN warns financial institutions about Russian sanctions evasion
On March 7, FinCEN issued an alert advising financial institutions to be vigilant against potential attempts to evade sanctions levied against Russian individuals, banks, and other entities in response to the situation in Ukraine. FinCEN provided several examples of red flag indicators that could help identify attempted sanctions evasions, including actions by state actors and oligarchs, and reminded financial institutions of their Bank Secrecy Act (BSA) reporting obligations.
The alert stressed that all financial institutions, including those with visibility into convertible virtual currency (CVC) flows identify and promptly report associated suspicious activity, and conduct appropriate, risk-based customer due diligence or enhanced due diligence as required. This includes CVC exchangers and administrators within or outside of Russia (which are generally considered to be money services businesses under the BSA) that retain at least some access to the international financial system. FinCEN noted that “[w]hile large scale sanctions evasion using [CVC] by a government such as the Russian Federation is not necessarily practicable, CVC exchangers and administrators and other financial institutions may observe attempted or completed transactions tied to CVC wallets or other CVC activity associated with sanctioned Russian, Belarusian, and other affiliated persons.”
Financial institutions are instructed to specifically watch for (i) transactions initiated from IP addresses located in Russia, Belarus, FATF-identified jurisdictions with anti-money laundering/countering the financing of terrorism/counter-proliferation deficiencies, or other sanctioned jurisdictions; (ii) transactions connected to CVC addresses listed on OFAC’s Specially Designated Nationals and Blocked Persons List; and (iii) customers’ use of a CVC exchanger or foreign-located money service businesses in high-risk jurisdictions, including those with inadequate “know-your-customer” or customer due diligence measures. FinCEN also warned financial institutions of the dangers posed by Russian-related ransomware campaigns and encouraged financial institutions to refer to FinCEN and OFAC resources to help detect, prevent, and report potential suspicious activity.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.