Cryptocurrency firms in the UK have begun self-reporting suspected breaches of sanctions against Russia, with three out of 50 recent self-reports coming from crypto exchanges, according to data from law firm Pinsent Masons.
The majority of reports, however, stem from the wider financial services sector, which flagged 38 suspected violations between 2023 and the end of December 2024.
The Office of Financial Sanctions Implementation (OFSI) mandates that cryptocurrency exchanges and digital wallet providers disclose any potential breaches or if they hold funds connected to sanctioned individuals. The UK’s sanctions list also includes several flagged crypto wallets, which facilitate peer-to-peer transactions beyond the traditional banking system, often obscuring the true ownership of assets.
Crypto’s Role in Sanctions Evasion
Concerns have long been raised about the potential for sanctioned individuals in the UK and the US to exploit cryptocurrency platforms to circumvent financial restrictions imposed by regulated banks.
In a high-profile case, a major US cryptocurrency exchange was fined $4.3 billion (£3.3 billion) by US officials in November 2023 for failing to prevent money laundering and sanctions violations.
The increased scrutiny on cryptocurrency transactions follows mounting concerns over digital assets being used to evade financial controls, with regulators worldwide seeking stricter oversight of the industry.
Compliance Efforts Strengthen
Hinesh Shah, partner and forensic accountant at Pinsent Masons, believes the recent self-reporting trend indicates that the Financial Conduct Authority’s (FCA) approach to allowing crypto firms to register is enhancing compliance.
“It is widely known that cryptocurrencies are being used to evade sanctions. It is good to see that some UK-based crypto firms are taking the problem seriously,” he said.
“Crypto firms operating in stricter regulatory and legal frameworks are much more likely to take their obligations seriously. Regulators have a history of fining aggressively for breaches, meaning UK-based crypto firms need to take this seriously.”
As regulatory scrutiny increases, the willingness of some crypto firms to self-report could mark a shift towards greater accountability within the industry. However, challenges remain in tracking and preventing illicit financial activity in a sector known for its decentralised and opaque nature.
