U.S. imposes sanctions on Russian crypto exchange over ransomware transactions

Designation of First Virtual Currency Exchange For Complicit Financial Services

According to OFAC, SUEX has facilitated transactions involving illicit proceeds from at least eight ransomware variants.  Further, some 40% of SUEX’s transactions are linked to illicit actors.  As such, SUEX was designated pursuant to Executive Order 13694 for providing material support to the threat posed by criminal ransomware actors.

According to crypto intelligence TRM Labs, SUEX operates as a “nested” exchange, meaning that instead of acting as a direct custodian of its clients’ crypto funds, it merely provides a custom-made interface while tapping into the services of a larger exchange - which appears to deal in transactions of $10,000 or more.  According to TRM Labs, this exchange accepted new customers on a system of referrals from trusted intermediaries. Its largest shareholder is a Russian national.

Importance of AML/CFT Measures For Virtual Currencies And Service Providers

Given the illicit finance risk that virtual assets pose, including ransomware-related money laundering, in June 2019 the Financial Action Task Force (FATF) amended its standards to require all countries to regulate and supervise virtual asset service providers (VASPs), including exchanges, and to mitigate against such risks when engaging in virtual asset transactions. 

Among other things, countries are expected to impose customer due diligence (CDD) requirements, and suspicious transaction reporting obligations across VASPs, which can help inhibit cybercriminals’ exploitation of virtual assets while supporting investigations into these illicit finance activities. Because profit-motivated cybercriminals must launder their misappropriated funds, AML/CFT regimens are a critical chokepoint in countering and deterring this criminal activity. This magnifies the need for all countries to effectively and expeditiously implement and enforce the FATF’s standards on virtual assets and VASPs. 

At Ondorse, we believe those in the virtual currency industry play a critical role in implementing appropriate AML/CFT and sanctions controls to prevent sanctioned persons and other illicit actors from exploiting virtual currencies to undermine regulatory policy. It’s time, more than ever, to monitor in real-time users and their transactions to ensure shell companies aren’t used to launder money from illicit transactions and better detect any funds involving SUEX which could cause serious regulatory harm.