US takes action against Russian crypto exchanges, G7 develops guidance on sanctions evasion, HKMA releases conclusions on AML information-sharing

FinCEN and OFAC have taken co-ordinated action against virtual currency exchanges connected with illicit Russian finance. FinCEN has issued an order designating the PM2BTC exchange as a “primary money laundering concern” relating to Russian cybercrime services. At the same time, OFAC has announced sanctions on the exchange’s operator and another exchange, Cryptex, registered in St. Vincent and the Grenadines. Compliance teams should ensure they are implementing these new sanctions and adjust their AML/CFT controls accordingly, ensuring blockchain analysis tools are used to identify wallets and transactions that may have “tainted funds” or exposure to the designated exchanges. 

The European Commission has published joint guidance with the G7 Sub-Working Group on Export Control Enforcement, educating firms on Russian sanctions evasion risk indicators and mitigation measures. Transaction-related red flags include: 

• Concealing end users by shipping goods through third countries, using shell companies, or listing a freight forwarder as the end user. 
• Unusual shipping routes based on the product and destination. 
• Invoice values divided into smaller amounts to remain under value limits.  

The guidance advises firms to screen transaction parties against official sanctions lists, conduct additional due diligence on any positive results, and report to local compliance authorities when the legitimacy of a transaction cannot be confirmed. 

The Hong Kong Monetary Authority (HKMA) has released the conclusions to its recent consultation on AML/CFT information-sharing. The consultation was launched last January and received 18 submissions from banks, professional associations, and law enforcement agencies. While respondents were generally in support of the proposal, some noted that requiring firms to always share information might lead to many low-value STRs, undermining the goal of enhancing report and intelligence quality.

The HKMA will now focus on updating its proposal as part of its wider review of banking oversight and continue to engage with stakeholders on its practical implementation. Firms should be aware of a planned 2025 date for information-sharing legislation. 

Until next week,

Andrew Davies, Global Head of Regulatory Affairs.