The Financial Crimes Enforcement Network (FinCEN) issued an Alert yesterday highlighting the possibility of Russia and Belarus attempting to evade newly imposed sanctions through unsanctioned financial institutions with access to the international financial system.
The Alert highlights red flags, including those related to crypto, to be on the lookout for, and reminds financial institutions of their reporting obligations under the Bank Secrecy Act (BSA).
Scenarios that should be treated as red flags;
- Transactions made to/from unsanctioned Russian/Belarussian financial institutions by unsanctioned legal entities or third party individuals may be conducted to shield the origin and ownership of the funds.
- Sudden increase in new company formations and value transfers without economic logic in the case of accounts in jurisdictions previously linked to Russia.
- Transfer attempts between new accounts and sanctioned institutions, as indicated by IP addresses.
- Transactions involving crypto addresses on the OFAC SDN list.
- Transactions made through VASPs in high risk countries with AML/CFT deficiencies.
- Transactions made through VASPs with inadequate KYC and CDD measures.
- Blockchain analytics software indicating transactions involving mixing services or ransomware attacks should be paid special attention to.
Special attention is called to quickly identifying and reporting such activities. In this regard, FinCEN reminds obliged entities of their Due Diligence obligations and the SAR filing process, urging the inclusion of the key term “FIN-2022-RUSSIA SANCTIONS”, as well as the importance of information sharing between financial institutions as authorized by section 314(b) of the USA PATRIOT Act.