In 2023, the AMLBot investigation team detected that individuals failed to comprehend the potential consequences of disregarding basic safety guidelines. Unexpected sanctions exposure challenges can arise, as was the case when a client approached us with concerns about a frozen account linked to suspected sanctions.
A client contacted us regarding an issue with the exchange platform that had frozen his account due to a suspected connection to sanctions. This client was doing a fiat-to-stablecoin exchange. He was converting USD 200,000 to USDT when the platform flagged his transactions as suspicious and froze them. Seeking assistance, the client contacted us to demonstrate his lack of association with sanctions and to prove that his assets were mistakenly frozen.
The Investigation Process
Upon conducting our risk assessment on the client's wallet and transaction history, we found that the client had unintentionally got some exposure to sanctions after exchanging USDT. Our analysis revealed a connection to a small percentage of sanctioned assets, yet the client himself was not on any sanctions lists and could verify the origin of his funds. Regrettably, the client found himself in an unfortunate situation where he exchanged his legitimate funds and received crypto assets with some exposure to sanctions. Despite this, the client was neither connected to sanctions nor involved in laundering illicit funds. Therefore, it was not within the rights of the crypto exchange platform to freeze his assets.
Office of Foreign Assets Control (OFAC) has been actively enforcing sanctions on certain cryptocurrency entities, notably Garantex, which has connections to Russia. This enforcement has significantly impacted users in CIS (Commonwealth of Independent States) countries, many of whom are innocent individuals. Garantex was a popular platform for these users for trading cryptocurrencies. Furthermore, smaller exchanges and financial services in these regions often relied on Garantex for liquidity.
As a result, any cryptocurrency that has ever touched Garantex is now considered tainted by these sanctions. Individuals not personally targeted by OFAC sanctions and earning their income legitimately might still find themselves with tainted sanctions assets and frozen accounts.
Presenting the findings of our risk analysis to the exchange platform, we proved that the client was not violating any sanction regimes and that the sanction exposure of crypto assets he received in exchange for fiat has no connection to our client. Therefore, after its internal investigation, the exchange platform acknowledged our conclusions, unblocked the account, and granted our client access to his crypto assets.
Story Summary and Crypto Hygiene Alert
Prioritizing security measures and conducting thorough due diligence on counterparties is essential to mitigate potential fraud or illicit activities risks. Risks in these transactions encompass the potential involvement of unscrupulous actors, exposure to fraudulent schemes, and the risk of financial loss. Adopting a meticulous approach to verifying the parties' legitimacy is crucial for establishing a secure and trustworthy environment within the decentralized crypto space.
To safeguard against situations like these, AMLBot provides specialized services for risk assessment and compliance. Our tools help individuals and businesses navigate the complexities of cryptocurrency transactions, ensuring safety and adherence to international regulations.