OFAC sanctions 13 entities for aiding Russian sanctions evasion via crypto

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) on Monday sanctioned 13 entities and two individuals for facilitating potential sanctions evasion on behalf of Russian nationals by building cryptocurrency-related services.

The OFAC pointed out in a statement that many of the individuals and entities sanctioned on Monday facilitated transactions or offered services to help other designated entities evade sanctions.

“Russia is increasingly turning to alternative payment mechanisms to circumvent U.S. sanctions and continue to fund its war against Ukraine,” said Brian E. Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, in the statement. 

Nelson added that the Treasury will continue to “expose and disrupt the companies that seek to help sanctioned Russian financial institutions reconnect to the global financial system.”

Growing efforts

In a blog post, blockchain analytics firm Chainalysis outlined the details of how some of the crypto firms helped with sanctions evasion. “Most of the sanctioned entities and individuals are based in Russia and all of them are linked to Russia through the services they provided.”

Two firms — Netex24 and Bitpapa — particularly stood out among all the newly sanctioned entities, according to Chainalysis. OFAC noted that Netex24 and Bitpapa have a history of transacting with OFAC-sanctioned banks, crypto exchanges and darknet markets by using crypto. 

Netex24 supports off-ramping to sanctioned Russian banks Tinkoff and Sberbank, as well as other similar organizations, Chainalysis said. Bitpapa operates a peer-to-peer crypto exchange and offers services to Russian nationals, according to the OFAC.

Chainalysis continued, citing on-chain data, to report that over the past two years, Netex24 and Bitpapa have “facilitated significant sending of funds to sanctioned entities.” The research firm pointed out that darknet markets constituted a significant portion of the transaction history in terms of outflows from the two to illicit and risky services. 

“Value sent by Netex24 and Bitpapa to sanctioned entities and darknet markets has steadily increased since the start of Russia’s war in Ukraine, whereas value sent to exchanges without [know-your-cutomer] guidelines and other illicit services has remained relatively flat,” Chainalysis said.

Chainalysis explained that it appears the OFAC is increasingly focusing on combating sanctions evasion through crypto businesses that facilitate on- and off-ramp activities for sanctioned Russian banks.