Compliance Insight Weekly Update

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This week in Compliance Weekly update: The Swiss government has announced that it is adopting new sanctions measures. In other compliance news, the US Office of Foreign Assets Control (OFAC) has settled with virtual currency exchange Kraken for over $360,000 related to apparent violations of the Iranian Transactions and Sanctions Regulations. The Federal Reserve Bank of New York has also announced that it is launching a pilot for a central bank digital currency (CBDC).

Switzerland adopts new sanctions measures

On November 23, 2022, the Swiss Federal Council adopted its eighth package of sanctions which targets two crypto aspects among other measures.

  • Primarily it adopted a full ban on „provision of crypto-asset wallet, account or custody services to Russian persons and residents, regardless of the total value of those crypto-assets”, thus aligning aligning its sanctions regime to the EU’s against Russia.
  • The exemptions to restrictions on accepting deposits and crypto-assets, among other transaction operations, were extended to include British nationals and holders of temporary or permanent permit in the United Kingdom.

OFAC Settles with Virtual Currency Exchange Kraken for over $360.000 Related to Apparent Violations of the Iranian Transactions and Sanctions Regulations

Despite having sanctions screening processes and devices in place, between October 2015 and June  2019, “Kraken processed 826 transactions, totaling approximately $1,680,577.10, on behalf of individuals who appeared to have been located in Iran at the time of the transactions”, due to lacking IP address blocking on transactional activity across its platform.

Kraken identified this shortcoming, addressed it by implementing automated blocking for IP addresses linked to sanctioned jurisdictions. And self-disclosed the sanctions violations to OFAC.

The Federal Reserve Bank of New York launched CBDC pilot

The New York Innovation Center (NYIC) was announced to participate in a 12-week „proof-of-concept project to explore the feasibility of an interoperable network of central bank wholesale digital money and commercial bank digital money operating on a shared multi-entity distributed ledger.”

This project is sustained by active participation of several US banks which will issue tokens and settle transactions through simulated central bank reserves.

“The NYIC looks forward to collaborating with members of the banking community to advance research on asset tokenization and the future of financial market infrastructures in the U.S. as money and banking evolve,” said Per von Zelowitz, Director of the New York Innovation Center.”

New York: PoW mining moratorium signed into law

New PoW crypto mining activities operated on carbon fuel will not be granted Environmental Conservation Law permits for two years. Such permits will still be granted to electric energy facilities that use alternatives to carbon-based fuel.