FinCEN Identifies Virtual Currency Exchange Bitzlato as a “Primary Money Laundering Concern” in Connection with Russian Illicit Finance

The Financial Crimes Enforcement Network (FinCEN) has published a press statement to announce the first ever designation of a financial institution as a „primary money laundering concern in connection with Russian illicit finance“ under the National Defense Authorization Act. Specifically, FinCEN has issued an order to designate the virtual currency exchange Bitzlato Limited (Bitzlato) incorporated in Hong Kong as such „primary money laundering concern“ for its engagement in the
1. facilitation of deposits and funds transfers by Russian ransomware groups or affiliates, such as Conti; and
2. facilitation of transactions with Russian darknet markets on behalf of both darknet customers and darknet vendors.
The designation pursuant to Section 9714 of the Combating Russian Money Laundering Act which is part of the above noted National Defense Authorization Act implies that all covered financial institutions as defined in Statutory Instrument 31 CFR 1010, § 1010.100(t) including banks, securities and commodities brokers, future commission merchants, mutual funds, and several others are prohibited to transfer any funds to and from Bitzlato or to and from any accounts or convertible virtual currency (CVC) address administered by or on behalf of the exchange.
The order and thus the prohibition apply from February 1, 2023. In this context, FinCEN has also published a new set of frequently asked questions (FAQs) to clarify issues such as
– how long will the order be in effect?
– what is a „covered financial institution“?
– just what transactions are prohibited under the order?
– how can covered institutions ensure compliance with the order?
– … and many others.