US Treasury Sanctions Notorious Virtual Currency Mixer Tornado Cash
WASHINGTON — Today, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned virtual currency mixer Tornado Cash, which has been used to launder more than $7 billion in virtual currency since its inception in 2019. This includes over $455 million. stolen by the Lazarus Group, a state-sponsored hacking group in the Democratic People’s Republic of Korea (DPRK) that was sanctioned by the United States in 2019, in the largest known virtual currency heist to date. Tornado Cash was then used to launder over $96 million in malicious cyber actor funds from the June 24, 2022 Harmony Bridge Heist, and at least $7.8 million from the August 2, 2022 Nomad Heist. Today’s action is taken pursuant to Executive Order (EO) 13694, as amended, and follows OFAC’s May 6, 2022 designation of virtual currency blender Blender.io (Blender).
“Today, the Treasury sanctions Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” the Treasury’s Under Secretary for Terrorism and Intelligence said. financier Brian E. Nelson. “Despite public assurances to the contrary, Tornado Cash has repeatedly failed to impose effective controls designed to prevent it from routinely laundering funds to malicious cyber actors and without basic measures to address its risks. The Treasury will continue to take aggressive action against mixers who launder virtual currency for criminals and those who assist them. »
The Treasury has worked to expose components of the virtual currency ecosystem, such as Tornado Cash and Blender.io, which cybercriminals use to conceal the proceeds of illicit cyber activity and other crimes. Although most virtual currency activity is legal, it can be used for illicit activities, including sanction evasion through mixers, peer-to-peer exchangers, darknet markets, and exchanges. This includes facilitating burglaries, ransomware schemes, fraud, and other cyber crimes. The Treasury continues to use its powers against malicious cyber actors in concert with other U.S. departments and agencies, as well as foreign partners, to expose, disrupt, and hold accountable perpetrators and those who enable criminals to profit from the cybercrime and other illicit activities. For example, in 2020, the Treasury Financial Crime Enforcement Network (FinCEN) imposed a civil fine of $60 million against the owner and operator of a virtual currency mixer for violation of the Bank Secrecy Act (BSA) and its regulations.
BLENDER: TORNADO CASH
Tornado Cash (Tornado) is a virtual currency mixer that runs on the Ethereum blockchain and indiscriminately facilitates anonymous transactions by masking their origin, destination and counterparties, without attempting to determine their origin. Tornado receives a variety of transactions and mixes them up before passing them on to their individual recipients. While the purported purpose is to increase privacy, mixers like Tornado are commonly used by illicit actors to launder funds, especially those stolen in major break-ins.
Tornado is designated pursuant to EO 13694, as amended, for materially aiding, sponsoring, or providing financial, material, or technological support, or goods or services to or in support of cyber activity originating from, or directed by persons located wholly or substantially outside the United States that are reasonably likely to cause or have materially contributed to a significant national security, foreign policy, health economic or financial stability of the United States that has the purpose or effect of causing a material misappropriation of funds or economic resources, trade secrets, personal identifiers, or financial information for commercial or competitive purposes or for private financial gain.
RISKS OF ILLICIT FUNDING
Virtual currency mixers that aid criminals pose a national security threat to the United States. The Treasury will continue to investigate the use of mixers for illicit purposes and use its powers to address illicit funding risks in the virtual currency ecosystem
Criminals have increased their use of anonymity-enhancing technologies, including blenders, to help conceal the movement or origin of funds. Additional information on illicit finance risks associated with mixers and other anonymity-enhancing technologies in the virtual asset ecosystem can be found in the National Money Laundering Risk Assessment 2022.
Players in the virtual currency industry play a critical role in meeting their anti-money laundering/countering the financing of terrorism (AML/CFT) and sanctions obligations to prevent sanctioned individuals and ‘other illicit actors to exploit virtual currency to undermine US foreign policy and national security interests. As part of this effort, the industry should adopt a risk-based approach to assess the risk associated with different virtual currency services, implement measures to mitigate risk, and address the challenges that anonymization features may present to comply with AML/CFT obligations. As today’s action shows, mixers in general should be considered high risk by virtual currency companies, who should only process transactions if they have appropriate controls in place to prevent mixers are used to launder illicit products.
IMPLICATIONS OF SANCTIONS
As a result of today’s action, all property and interest in property of the above entity, Tornado Cash, that is in the United States or in the possession or control of U.S. persons is blocked and should be reported to OFAC. In addition, all entities owned, directly or indirectly, 50% or more by one or more blocked persons are also blocked. All transactions by U.S. Persons or within (or in transit of) the United States that involve property or interests in property of named or otherwise blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt. These prohibitions include making any contribution or supply of funds, goods or services by, to or for the benefit of any Blocked Person and receiving any contribution or supply of funds, goods or services from such person.
OFAC’s sanctioning authority and integrity stems not only from OFAC’s ability to designate and add individuals to the SDN List, but also from its willingness to remove individuals from the SDN List in accordance with the law. The ultimate goal of sanctions is not to punish, but to bring about positive behavior change. For more information on the process for requesting removal from an OFAC list, including the SDN list, please refer to OFAC’s 897 Frequently Asked Questions here. For detailed information on the process of submitting an OFAC sanctions list removal request, click here.
For identifying information on the entity sanctioned today, as well as associated virtual wallet addresses, click here.
To report a cybercrime, contact the Federal Bureau of Investigation’s Internet Crime Complaint Center here.
To view the US Government’s 2020 DPRK Cyber Threat Advisory, click here.
For more information on virtual currency sanctions compliance, see OFAC’s Sanctions Compliance Guide for the Virtual Currency Industry here and OFAC’s Virtual Currency FAQs here.
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