Sanctions by U.S. Treasury Department target cryptocurrency used to fund WMD

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FORUM Staff

The United States Department of the Treasury Office of Foreign Assets Control (OFAC) has instituted sanctions and begun freezing accounts used to fund weapons of mass destruction (WMD).
The use of cryptocurrency to generate illicit revenue for WMD and ballistic missile programs is on the rise across the Indo-Pacific, particularly in North Korea. Virtual currency mixers used by Pyongyang, such as Blender.io (Blender) and Tornado Cash, facilitate illegal transactions by obfuscating their origin, destination and counterparties, according to the U.S. Treasury Department. They mix multiple transactions before transmitting, making them difficult to track. Blender uses bitcoin, while Tornado Cash focuses on ethereum. Blender has transferred more than U.S. $500 million since its creation in 2017, and Tornado Cash has laundered more than U.S. $7 billion since its creation in 2019, according to the U.S. Treasury Department.

“Virtual currency mixers that assist illicit transactions pose a threat to U.S. national security interests. We are taking action against illicit financial activity by the DPRK and will not allow state-sponsored thievery and its money-laundering enablers to go unanswered,” said Brian E. Nelson, the undersecretary for terrorism and financial intelligence, using the initials for North Korea’s official name, the Democratic People’s Republic of Korea.

North Korea has used currency mixers to fund its WMD and ballistic missile programs, which have been hit with U.S. and United Nations Security Council sanctions. North Korean actors have used Blender to launder over U.S. $20.5 million and used Tornado Cash to launder more than U.S. $96 million. OFAC imposed sanctions on Blender in May 2022 and Tornado Cash in August 2022. Under the penalties, mixer accounts in the U.S or in possession or control of U.S. citizens are blocked and must report to OFAC, according to the U.S. Treasury Department. Further, entities operating on Blender or Tornado Cash that are 50% or more owned by U.S. citizens or individuals under OFAC sanctions are blocked from making transactions.

“While most virtual currency activity is licit, it can be used for illicit activity, including sanctions evasion, through mixers, peer-to-peer exchangers, darknet markets and exchanges,” according to the Treasury Department. “This includes the facilitation of heists, ransomware schemes and other cybercrimes.”

OFAC has also sanctioned the Lazarus Group, North Korea’s state-sponsored hacking organization, for such cybercrimes. The Lazarus Group has been tied to the 2016 hack on Sony Pictures, where hackers stole massive amounts of data from Sony servers before wiping them clean.

IMAGE CREDIT: ISTOCK

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