Syed Rahman details events and the issues involved
The Russian cryptocurrency exchange Garantex has been taken down and seized by the US Secret Service and international law enforcement agencies.
The action follows accusations that the exchange has links to darknet markets and ransomware hackers. These accusations led to the Garantex website being replaced by a notice stating that its domain has been seized by the Secret Service following a warrant by the U.S. Attorney’s Office for the Eastern District of Virginia.
The taking down of the site is the latest in a series of steps taken by Western governments against the Moscow-based exchange. In February, the European Union (EU) sanctioned Garantex - as part of a package of sanctions imposed on Russia for its invasion of Ukraine – saying that Garantex was “closely associated’’ with Russian banks that had already been sanctioned.
Three years ago, the US Treasury sanctioned Garantex, alleging that more than $100 million in transactions carried out on the exchange were associated with “illicit actors and darknet markets”; including the Russian ransomware gang Conti and the darknet market Hydra.
Ongoing
The US Secret Service has said the seizure of Garantex is part of an ongoing investigation but has offered no further details. Its action was carried out in coordination with the US. Department of Justice, the US Federal Bureau of Investigation, Europol, the Dutch National Police, the German Federal Criminal Police Office, the Frankfurt General Prosecutor’s Office, the Finnish National Bureau of Investigation, and the Estonian National Criminal Police.
Since the action against it, Garantex has said it is suspending all services, including cryptocurrency withdrawals. This announcement came after stablecoin issuer Tether froze $28 million worth of its cryptocurrency that was on Garantex.
Garantex’s plight is yet another case that reinforces the importance of ensuring your know your customer (KYC) and anti-money laundering (AML) controls are fit for purpose. Compliance is, after all, compulsory rather than optional. We are in an era where cooperation is popular - the global regulatory environment is shifting towards collaborative, intelligence-led enforcement. Crypto firms need to take advice so that they understand their multi-jurisdictional exposure and can actively manage the risks.
