Treasury Official Says Digital Currencies Helping Sanctions Evaders, Stresses OFAC Compliance

Speaking at a cryptocurrency conference in New York, Sigal Mandelker, Treasury’s under secretary for terrorism and financial intelligence, said more countries are turning to digital currencies to evade U.S. sanctions. She also stressed the importance of complying with the Office of Foreign Assets Control sanctions programs, rejected the notion of a “one-size-fits-all” compliance program and warned that Treasury is looking into small actors -- not just large companies -- who commit violations.

During the May 13 conference, Mandelker said that although U.S. sanctions programs have successfully cut out “bad actors … from the global financial system,” some have found alternatives in digital currency. She named Iran, Venezuela and Russia as countries that “launched or announced plans to launch a national digital currency,” adding that some have “brazenly stated” their intent is to evade U.S. sanctions. While Venezuela’s attempt to establish the “oil-backed ‘Pretro’ … failed to attract many investors,” Mandelker said, other “dictators and rogue regimes will inevitably try to succeed.”

Mandelker said OFAC sanctions apply to both regular and digital currencies and warned of civil and criminal penalties for failing to comply. She said each company’s compliance program must be molded to their specific business, but she did list several “common themes” in successful programs, including developing a “risk-based” program, conducting due diligence on customers and ensuring your company is not doing business with any individuals or entities on OFAC’s sanctions lists. She also stressed the importance of communicating with customers about commitments to OFAC compliance before entering into agreements.

Mandelker also urged companies not to be misled by the fact that OFAC has “gone after some of the biggest non-compliant actors in this industry.” Treasury will “also go after the individual actors who -- while maybe smaller in size -- egregiously flaunt their obligations,” she said.

She also urged those in the digital currency industry to prioritize compliance before choosing to put a product or service into the marketplace.