CTA: Crypto Compliance and Sanctions

“There has never been a more important moment in the crypto and compliance industries to make sure that we have the controls in place to mitigate the risk of complicit actors.” 

Ari Redbord, TRM Labs

Speaking at the GDF Emergency Summit on Sanctions, Ari Redbord, head of Legal and Government Affairs at TRM Labs, highlighted that there is an industry rallying cry to everything that we possibly can to ensure that crypto platforms are not used to evade sanctions. 

He recommended that firms focus on their compliance programmes, and hire the best compliance professionals available. As the sanctions progress, it will be increasingly important to have good transaction monitoring, wallet screening, and ensure firms understand who they are engaging with. 

As an industry, we must address the perception, or rather, misconception, that crypto is a useful way for Russia to evade sanctions. 

Redbord highlighted two reasons why crypto is not useful in the case of sanctions evasion: 

  1. Many crypto businesses are treated as money service businesses (MSB) in the US and elsewhere, and as such have created robust compliance controls. The development of these frameworks is a tribute to the compliance professionals at these exchanges. 
  2. There is not enough liquidity across crypto to fund a country like Russia and have a meaningful impact on the sanctions. The sanctions are targeting between $630-640 in central bank assets and  $1.5 trillion dollars in trade. The entire market cap of digital assets does not begin to approach this number. 

As put by Todd Conklin, counselor to the deputy secretary of the treasury, said given “the scale of what they have to move, and where they have to move things from, [crypto is] not necessarily going to be that concerning” An attempt to move that much money through exchanges would contribute to “a bit more of a spike in the crypto market, in my view, than has been observed lately.”

Though the risks are low, we must be realistic and accept that some will attempt to evade sanctions on the margins because it moves outside of traditional finance. However, we can work with law enforcement to stop this. 

This is most likely to happen on non-compliant exchanges, those that do not have the appropriate compliance and KYC controls. With the right tools, these exchanges can be tracked, and compliant exchanges can work to ensure that they are not engaging with these entities. 

As a community, we must keep talking about how crypto is not a good means to launder money. Though money laundering may happen on the margins, from both a liquidity and a visibility standpoint, it is not a useful tool at scale. 

Watch the full keynote here.