UK enforces crypto exchanges to report suspected sanction breaches

Official sanction guidance was updated on 30 August, to include “cryptoassets”

In this photo illustration a novelty Bitcoin token is photographed with a Russian flag, on 13 March, 2022 in Bristol, England                                 
Using cryptos to evade sanctions was already illegal under UK law - Photo: Getty Images

Cryptocurrency exchanges operating in the UK must now report suspected sanction breaches to authorities, amid rising concerns that cryptos are being used to circumvent restrictions placed on Russia.

Numerous sanctions have been placed on the cuntry after its invasion of Ukraine which started 24 February 2022 by countries such as the US, UK and Canada, and by the European Union (EU).   

Official guidance from the UK Treasury’s Office of Financial Sanctions Implementation was updated on 30 August, The Guardian reported, to include a ruling that “cryptoassets” are among the assets that must be frozen if sanctions are imposed.

The rules now mean a crypto exchange is committing a criminal offence if it fails to report clients who have been sanctioned using its services. The rules state that even if the exchange suspects a sanctioned individual is using its platform, it must report the suspected offence, putting exchanges in similar categories to estate agents, accountants, lawyers and jewellers regarding reporting potential sanctions-breaking.

Binance restrictions 

In April, Binance, the world’s largest cryptocurrency exchange by trading volume, limited its services to Russian nationals, people living in Russia or legal entities established in the country.

The restrictions apply to Russian individuals or companies that have crypto assets exceeding €10,000 ($9,935, £8,632).

Accounts that fall under these rules will be placed on withdrawal-only status, meaning individuals or businesses will not be able to make deposits or trades with their Binance accounts. The new limit also covers all spot, futures, custody wallets and staked and earned deposits.

Russian nationals who do not live in Russia and have completed a proof-of-address verification, along with Russian nationals or legal entities in Russia that hold crypto assets below €10,000, will not be affected by these rules.

Binance has said it believes that other major crypto exchanges should follow the procedures that it has put in place.

Evasion already illegal in UK

Using cryptos to evade sanctions was already illegal under UK law. The change in the rules shows how concerned authorities are regarding using digital assets for the evasion of sanctions.     

A Treasury spokesperson said: “It is vital to address the risk of cryptoassets being used to breach or circumvent financial sanctions. These new requirements will cover firms that either record holdings of, or enable the transfer of cryptoassets and are therefore most likely to hold relevant information.”

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