Alert highlights Russia sanction evasion ‘red flags’ for institutions to anticipate

Red flags to assist in identification of suspected evasion of sanctions implemented in connection with the Russian invasion of Ukraine are highlighted in an alert issued Monday by the Treasury Department’s top financial law enforcement unit.

According to the alert issued by Treasury’s Financial Crimes Enforcement Network (FinCEN), all financial institutions should be vigilant against potential efforts to evade sanctions, which were imposed by the U.S. government (and the Treasury Department in particular) in response to the Russian invasion.

“Although we have not seen widespread evasion of our sanctions using methods such as cryptocurrency, prompt reporting of suspicious activity contributes to our national security and our efforts to support Ukraine and its people,” Acting FinCEN Director Him Das said in a statement. He said that sanctions evasion may occur through various means, including through currently unsanctioned Russian and Belarusian banks or other financial institutions that retain at least some access to the international financial system.

The alert asserts that although large scale sanctions evasion using convertible virtual currency (CVC) by a government such as Russia’s “is not necessarily practicable,” CVC exchangers and administrators and other financial institutions may observe attempted or completed transactions tied to CVC wallets or other CVC activity associated with sanctioned Russian, Belarusian, and other affiliated persons.

In addition, FinCEN reminded financial institutions of dangers posed by Russian-related ransomware campaigns.

“All financial institutions—including those with visibility into cryptocurrency or CVC flows, such as CVC exchangers and administrators—should identify and report suspicious activity associated with potential sanctions evasion quickly and conduct appropriate, risk-based customer due diligence or enhanced due diligence where required,” the alert states. “Financial institutions are also encouraged to make full use of the information sharing authorities” provided under the USA PATRIOT Act.

The agency said relevant information to assist with law enforcement investigations will be shared with the Justice Department, international partners, and task forces established to track and freeze the assets of Russian elites.

FinCEN Provides Financial Institutions with Red Flags on Potential Russian Sanctions Evasion Attempts