The U.S. Treasury has sanctioned two crypto exchanges in the UK, Zedcex and Zedxion, for allegedly assisting Iran in evading U.S. and international financial sanctions. The sanctions were issued by OFAC, or the Office of Foreign Assets Control, at the U.S. Treasury. This is the first time that OFAC has sanctioned crypto exchanges for their role in Iran’s financial sector.
According to the U.S. Treasury, the two crypto exchanges provided users with access to financial services that supported Iranian individuals and entities who are subject to U.S. sanctions. OFAC further stated that the two crypto exchanges facilitated sanctioned persons in moving their funds through the international financial system using digital assets.
Targeted Individuals and Groups
In addition to the transactions, OFAC designated seven Iranian individuals to the blocklist. Also sanctioned was Babak Zanjani, an Iranian businessman with a past financial conviction record, who was reportedly freed for the sole purpose of facilitating funds for the regime.
According to Treasury officials, the group utilized cryptocurrency infrastructure to obscure the flow of funds and evade traditional banking controls. Blockchain analysis related to the designation reveals that wallet addresses associated with these entities facilitated over $389 million in transactions.
The Treasury emphasized that the use of digital assets does not provide a shield from sanctions enforcement and that crypto-related activities are still subject to US laws and regulations.
Implications for Crypto Compliance
OFAC emphasized that these sanctions are a strong statement about the enforcement of sanctions in the face of evolving financial technology. OFAC warned that crypto platforms that do not follow proper compliance procedures may be facilitating illicit finance and could be subject to enforcement action if they knowingly facilitate sanctioned jurisdictions or persons. The sanctions require U.S. persons to freeze all property and interests in property of the named entities and to prohibit all transactions involving them.
However, Treasury officials emphasized that all exchanges must have strong compliance programs regardless of their base. The actions against Zedcex and Zedxion indicate toughening of U.S. enforcement of evasion facilitated by crypto related to Iran. OFAC’s designation of the exchanges and the individuals involved in the transfer of illicit funds indicates that the digital asset industry is bound by U.S. sanctions laws.
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