On October 15, 2021, the US Department of the Treasury’s Office of Foreign Assets Control published a brochure entitled, “Sanctions Compliance Guidance for the Virtual Currency Industry,” to assist the virtual currency community to comply OFAC sanctions and develop an understanding of sanctions requirements. In addition, OFAC updated frequently asked questions 559 and 646.
In FAQ 559, OFAC defines common industry terms including “digital currency,” “digital currency wallet,” “digital currency address,” and “virtual currency,” and in FAQ 646, OFAC explains how US persons should block and report certain virtual currency in their possession. Within FAQ 646, OFAC reiterates that U.S. persons must report blocked virtual-currency to OFAC within 10 business days of the blocking, and on an annual basis for as long as the virtual currency remains blocked. However, OFAC also makes clear that U.S. persons need not convert the blocked virtual-currency into U.S. dollars, nor are they required to hold such blocked property in an interest-bearing account.
These OFAC publications coincide with the release of a report, “Financial Trend Analysis - Ransomware Trends in Bank Secrecy Act data” by the Financial Crimes Enforcement Network (FINCEN) that shows the increasing threat posed by ransomware to the US financial sector based on data obtained during the first half of 2021. Based on FinCEN’s analysis of suspicious activity reports (SARs) filed between January 1 and June 30, 2021, ransomware-related SARs have increased by 30 percent, with 458 transaction filed in the first six months of 2021 compared to 487 filed for the entire 2020 calendar year. In addition, the value of the SARs totaled $590 million, which already exceeds the $416 million reported for the entirety of 2020.
Both OFAC and FinCEN report that virtual currency is the primary ransomware payment method, highlighting the important role that the industry has in countering ransomware threats and preventing sanctioned parties from exploiting virtual currencies. According to OFAC, the brochure is intended to promote sanctions compliance and emphasize that OFAC requirements apply to virtual currency industry in the same manner in which they apply to traditional financial institutions.
Department of Treasury Press Release | Department of Treasury Recent Action | OFAC - Sanctions Compliance Guidance for Virtual Currency | FAQ 559 | FAQ 646 | FinCEN - Ransomware Trends in Bank Secrecy Act Data