Author: Syedur Rahman
4 November 2023
2 min read
Syed Rahman assesses the key aspects of the case.
On 03 November 2023, the US Department for the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Russian national Ekaterina Zhdanova. This followed concerns about her involvement in laundering cryptocurrencies on behalf of Russian elites.
OFAC’s justification for implementing sanctions against Zhdanova, as set out in the Treasury Department’s statement, was her use of virtual currencies to assist Russian elites in laundering over $2.3 million into Western Europe through a fraudulently-opened investment account and real estate purchases. One way in which Zhdanova would do this was through the cryptocurrency exchange Garantex Europe OU (Grantex) – a US-sanctioned cryptocurrency service provider.
Zhdanova seemingly operated a complex scheme with the aim of moving Russian oligarchs’ assets into the open market. This scheme included using traditional financial networks and establishing a presence in the UAE; which allowed her to move funds into accounts set up in this jurisdiction. She also used entities with known poor anti-money laundering regulations, which facilitated further transfers on to other open markets, including Europe. OFAC’s report lists one instance in which Zhdanova’s services were requested to assist in the moving of over $100 million in assets into the UAE.
Zhdanova also had connections and working relations with known Russian ransomware group Ryuk and its affiliates. She even assisted in the laundering of $2.3 million suspected to have been acquired from victims of Ryuk’s ransomware attacks.
This case is a clear reminder of the nefarious activities associated with the use of cryptocurrencies and the markets. Since the invasion of Ukraine in February 2022, Russian alites and their proxies have become more sophisticated and creative in their attempts to move illicit assets into more open markets.
OFAC does not appear to be slowing down in its efforts to identify and target individuals who participate in these types of activities. That is why it is important for individuals and entities - operating in not only the crypto sphere but also more traditional financial services - to implement robust anti-money laundering and anti-sanctions violation procedures.
In light of the recent conviction of FTX founder Sam Bankman-Fried, the crypto industry has had its reputation dragged through the mud. There appear to be top-to-bottom instances of bad actors seeking to utilise cryptocurrencies and its associated services to engage in illegal activity. This seemingly begs for more stringent regulations to be implemented internationally. But while there has been some movement in this regard in recent years, bad actors are clearly finding ways to continue to circumvent the current regulatory framework that is in place.
Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.