Recently, the US and UK governments have initiated a joint investigation into crypto transactions exceeding $20 billion that may have breached Russian sanctions. These transactions are suspected of being funneled through the Russia-based crypto exchange Garantex, with the intention of circumventing international sanctions and potentially financing military operations in Ukraine.
In the past few months, the US has been increasingly stringent in cracking down on the utilization of cryptocurrencies to avoid sanctions. Notably, the US recently imposed sanctions on crypto wallets associated with GAZA Now. Despite being sanctioned by both the US and the UK for alleged involvement in financial crimes and facilitating illicit transactions within Russia, the Moscow-based exchange Garantex purportedly processed substantial amounts using Tether’s stablecoin USDT.
Despite the widespread sanctions against Russia, Western countries have encountered difficulties in preventing financial inflows into the nation. Russia has been reported to employ various tactics to bypass these sanctions, including offshore transactions, tech exchanges via intermediary countries, and the use of encrypted digital currency transactions. These strategies have made it challenging for Western nations to sever financial support for Putin’s regime effectively.
The Biden administration has intensified its scrutiny of crypto exchanges like Garantex to disrupt Russia’s financial channels. The $20 billion worth of transactions under investigation underscores the complexities involved in implementing financial sanctions successfully. Notably, there have been no direct allegations of wrongdoing against Tether Holdings amid the ongoing probe. Tether Limited has emphasized its commitment to compliance standards and its cooperation with law enforcement agencies.
Tether Limited has taken proactive steps to freeze assets associated with entities on the US sanctions list, contributing to the fight against illicit financial activities. In contrast, Garantex has chosen to remain silent in response to the investigation. Both the US Treasury and their UK counterparts, such as the Treasury and National Crime Agency, have refrained from commenting on the ongoing inquiry.
Established in Estonia in 2019, Garantex later relocated most of its operations to Moscow due to regulatory obstacles and the revocation of its operating license. The exchange has faced allegations from the US Treasury in the past, accusing it of engaging in unlawful activities and disregarding anti-money laundering protocols.
The joint investigation by the US and UK into crypto transactions violating Russian sanctions sheds light on the challenges countries face in enforcing financial restrictions effectively. By targeting crypto exchanges like Garantex, authorities aim to disrupt illicit financial flows and prevent the misuse of cryptocurrencies for circumventing sanctions. The outcome of this investigation will likely have significant implications for the regulation of crypto transactions and the enforcement of financial sanctions globally.