SEC And Office Of Foreign Assets Control (OFAC) Make Headway On Crypto Sanctions Enforcement
SEC Makes Headway On Crypto Sanctions Enforcement With The OFAC
Though cryptocurrency has managed to find many ways to thrive over the last decade, the current place they seem to be putting their attention is on the Securities and Exchange Commission (SEC). The SEC has been in deliberation about the best ways to focus on the regulatory measures in the space, which have become even more prominent in the last two months. However, one of the biggest developments has been with the implementation of U.S. sanctions laws by the Treasury Department’s Office of Foreign Assets Control (OFAC).
In the last week alone, two Iranians were sanctioned by OFAC for their attacks against US-based cyber networks. The decision to target both individuals, along with their bitcoin addresses, is a milestone moment for OFAC, demonstrating their aggressive stance on sanction law compliance.
The sanctions come directly from the ways that the current policies determine which countries and entities are not allowed to have interactions with “U.S. persons.” This category is fairly extensive, because it includes citizens around the world, non-US nationals in the US, and entities that are covered by US law.
According to regulations, the OFAC’s authority covers the ability to impose sanctions, which are based on what could threaten the security of the nation. OFAC has often implemented “primary sanctions” by stopping U.S. persons from transacting in any way with the sanctioned entity. Some of the sanctions have no room for movement, like the ones that stop citizens from involving themselves in nearly any transaction that would the country, like Iran. However, there are also sanctions that only cover certain transactions, like Venezuela’s debt transactions. Any violations of these sanction are punishable as a criminal or civil offense, associated with big fines.
OFAC separates itself from other regulatory agencies in that it doesn’t specifically outline formal compliance requirements. Instead, there’s a “strict liability” force, punishing any intentional or unintentional action against the sanctions. Still, the exchanges and other firms that tend to keep strict compliance could have a chance of invoking some leniency in their violations.
Ensuring that companies are able to increase their compliance and adherence to said programs, there are many press releases, policy statements and more that OFAC publishes. For stakeholders in certain industries, OFAC has even setup suggestions already to ensure their adherence. Any issues in between are handled with “guidance by enforcement.”
OFAC has been quiet about the increased appearance of cryptocurrencies over the last few years, even though other federal agencies have continually brought this concern to light. After many requests from stakeholders to provide more clarity in the industry, OFAC has finally started to take actions.
Nine month ago, OFAC stopped U.S. persons from participating in transactions with the new Petro from Venezuela. They added a FAQ list about the obligations of the sanctions, which remain the same, “regardless of whether a transaction is denominated in a digital currency or traditional fiat currency.” Two months ago, when the government withdrew from the Iran nuclear deal and created new sanctions, the Treasury Department said that the country was participating in illicit activities, which included cryptocurrency involvement. This new awareness resulted in the further ban of interactions, and many exchanges subsequently pulled their services from the country.
So, the question is, what comes next? The actions that OFAC has taken has placed cryptocurrency in the middle of many conflicts. As such, there are three ways that companies can change their protocols and performance to ensure that they stay out of OFAC’s radar – adhere to compliance regulations strictly, become knowledgeable about the risk, and expect enforcement.