OFAC issued sanctions compliance guidance for participants in the virtual currency industry, including technology companies, exchangers, administrators, miners, wallet providers and traditional financial institutions.
In the guidance, OFAC provided both general information as to its sanctions programs and specific guidance as to the implementation of an effective sanctions compliance program for virtual currency industry participants. In updated FAQ 559, OFAC defined "digital currency," "digital currency wallet," "digital currency address" and "virtual currency," and in FAQ 646, OFAC provided details on the blocking of virtual currency pursuant to U.S. sanctions, including applicable reporting requirements.
OFAC highlighted that sanctioned persons are drawn to virtual currency, both to perpetrate malign activity and to evade U.S. sanctions. OFAC stated that "it is vital that the virtual currency industry prioritize cybersecurity and implement effective sanctions compliance controls to mitigate the risk of sanctioned persons and other actors exploiting virtual currencies to undermine U.S. foreign policy interests and national security."
Commentary
OFAC's Sanctions Compliance Guidance for the Virtual Currency Industry is the most detailed industry-specific guidance issued by the agency in many years. Although only briefly noted in the guidance, its publication appears to have been motivated in part by the nexus between virtual currency and the increasing threat of ransomware attacks. As explained in a Treasury press release, the guidance is part of a whole-of-government effort to combat this threat, which also includes a FinCEN report on pattern and trend information related to ransomware payments. As covered here and here, the virtual currency industry has already been targeted by numerous OFAC enforcement actions. Following the publication of OFAC's guidance, the agency is likely to take an even harder line against industry participants who fail to implement an effective sanctions compliance program. Whether OFAC will issue similar detailed guidance for other industries remains to be seen.
Primary Sources
- OFAC Guidance: Sanctions Compliance Guidance for the Virtual Currency Industry
- OFAC FAQ: Questions on Virtual Currency - 559
- OFAC FAQ: Questions on Virtual Currency - 646
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