The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned the virtual currency mixer Tornado Cash. Since it’s creation in 2019, Tornado Cash has allegedly been used to launder more than $7 billion worth of virtual currency. Included in the $7 billion is over $455 million stolen by the Lazarus Group, a Democratic People’s Republic of Korea stat-sponsored hacking group. The Lazarus Group was sanctioned by the United States in 2019. OFAC also reports that Tornado Cash was used to launder more than $96 million of malicious funds derived from the Harmony Bridge Heist.
The U.S. Treasury has been working to bring criminals using virtual currency ecosystem to public attention. In 2020 FinCEN fined Larry Harmon $60 million dollars. Harmon is the operator of Helix and Coin Ninja, cryptocurrency mixing systems. However, Tornado Cash is very different from other sanctioned entities because it is not an organization run by actual people – it is just code. That makes these sanctions unique, but also controversial.
Cryptocurrency Mixers and Financial Crime
Mixers, like Tornado Cash and Helix, have the stated use of increasing privacy, but are commonly used to launder illicit funds. These mixers can receive a large variety of transactions, then mix them, before sending them to their individual intended recipients. This process does help with privacy, but can also enhance anonymity and make it very difficult to track the source and/or the flow of funds. FinCEN considers these mixers to be money transmitters, therefore subject to the Bank Secrecy Act and other compliance regulations,
However, these technologies aren’t often or never submitting Suspicious Activity Reports or performing any kind of know-your-customer policies. They don’t have an Anti-Money Laundering procedure and cryptocurrency technology should be performing these duties as any financial institution does according to regulators.
Anti-Money Laundering Cryptocurrency Technology
Truth Technologies‘ provides software that can help prevent financial crime. Contact us today for a free demo and see how we can help your organization adhere to the Bank Secrecy Act and AML/KYC regulations.