U.S. regulators eye cryptocurrency industry

In her monthly Expert Take column, Selva Ozelli, international tax advisor and CPA, covers the intersection between emerging technologies and sustainability, and provides the latest developments in taxes, AML / CFT regulations and legal issues affecting crypto. and blockchain.

Lately, headlines have focused on regulators’ concerns about the lack of investor protection in the cryptocurrency market, which has swelled to over $ 2 trillion, and possible risks to stability. financial.

National security agencies in the administration of US President Joe Biden grapple with high-profile cases of cryptocurrencies playing a role in ransomware attacks, intellectual property espionage, sanctions violations, corruption officials and tax evasion.

According to a recent report published by the Financial Crimes Enforcement Network, reports of suspicious ransomware activity filed in the first half of 2021, which are up 30% from the full year of 2020, indicate that ransomware constitutes a growing threat to the US financial sector. , businesses and the public

The Biden administration is evaluating an executive order for federal agencies to study and make recommendations on relevant areas of the crypto industry related to national security, economic innovation, and financial regulation. The initiative would also aim to coordinate the work of agencies on digital currencies across the executive branch, with a first-ever White House crypto czar acting as the point of reference.

“Pandora Papers” by the International Consortium of Investigative Journalists

The International Consortium of Investigative Journalists has released its “Pandora Papers,” which have disclosed nearly 12 million documents from law firms and other organizations around the world that uncover the hitherto unknown owners of 29,000 companies. offshore hiding up to $ 32 trillion in assets in the world of taxation or regulatory oversight in tax havens.

The owners of these companies include celebrities, political leaders and underworld figures from over 200 countries. The leak has already sparked corruption and tax evasion investigations with several government officials around the world.

Meanwhile, a report from the World Economic Forum explains how blockchain technology can help dismantle corruption in governments.

Related: CFTC Renewed: What Biden’s New Agency Chooses For Crypto Regulation

OFAC of the US Treasury Department

In a unique case, the Office of Foreign Assets Control (OFAC) recently targeted Suex, an OTC digital currency broker, for its alleged role in laundering proceeds from ransomware attacks. The effort was part of a government-wide effort to counter ransomware and disrupt criminal networks and crypto exchanges that play a role in ransom laundering. The goal is to improve cybersecurity in the private sector and increase reporting to US government agencies of ransomware incidents and payments. This includes both the Treasury Department and law enforcement as part of the fight against money laundering and the financing of terrorism (AML / CFT), as digital currency is the primary means of facilitating transactions. ransomware payments and associated money laundering activities.

As a result of this case, OFAC issued an “updated notice on potential sanction risks to facilitate ransomware payments.” The updated advisory highlights that the US government still strongly advises against paying cyber ransoms or extortion demands and recognizes the importance of improving cybersecurity practices to prevent or mitigate such attacks. .

Related: Compliance with sanctions for fiat and cryptocurrency transactions is the same

OFAC has also updated the notice to stress the importance of reporting and cooperating with the government and appropriate law enforcement agencies in the event of a ransomware attack, in order to understand and counter ransomware attacks and malicious cyber actors and for attack victims to receive voluntary self-disclosure credit in the event a sanction link is determined later. For more information, see the government’s Stop Ransomware website.

Given the financial risks of ransomware and money laundering posed by digital assets on a global scale, participants at the G7 meeting in June pledged to work together to urgently address this growing risk of globalization. efficient and timely manner by implementing and enforcing Financial Action Task Force AML standards on digital assets and virtual asset service providers.

Related: Are cryptocurrency ransom payments tax deductible?

Intellectual property and cryptocurrency espionage

In other recent cases and reports, the cryptocurrency was involved in spying on intellectual property. Ethereum developer Virgil Griffith recently pleaded guilty to conspiring to violate the International Emergency Economic Powers Act – which is used to prevent American citizens from exporting technology and intellectual property to communist countries – when he gave a presentation on cryptocurrency and blockchain at a North Korean conference in 2019 As part of the plea deal, Griffith could face up to 6.5 years in prison when he will be sentenced in January 2022.

Jonathan Toebbe, a US Navy nuclear engineer who held a top-secret security clearance specializing in naval nuclear propulsion – and had access to military secrets – was accused in October of attempting to impart information about the design of American nuclear submarines to someone. he believed he was a representative of a foreign government in exchange for cryptocurrency in violation of the atomic energy law, the Justice Department said.

Cybereason, an operations-centric cyberattack protection provider, released a new report titled “Operation GhostShell: Novel RAT Targets Global Aerospace and Telecoms Firms” which uncovers a highly targeted cyber espionage operation against global aerospace and telecommunications. The report, which follows the August release of the company’s “DeadRinger” report, reveals a newly identified Iranian actor, dubbed MalKamak, who was behind the attacks and had been operating since at least 2018. MalKamak used a system very sophisticated hitherto unknown. Remote access trojan known as “ShellClient” which evades antivirus and other security tools and abuses cloud service provider Dropbox for command and control.

Related: US Updates AML / CFT Crypto Laws

According to a study published by Slovak security provider ESET, a cyber espionage group called FamousSparrow has been targeting hotels, international governments, international organizations, engineering companies and law firms since at least 2019. The group has used a known Microsoft Exchange vulnerability, which has also been exploited by suspects. Chinese hackers and crooks seeking to mine cryptocurrency – to attack its victims, including the Association of Republican Governors of the United States. Although ESET did not connect FamousSparrow to a specific nation, it found similarities between its techniques and those of SparklingGoblin, an offshoot of Winnti Group – which is linked to China – and DRBControl.

In July, the US government accused China of exploiting the Microsoft Exchange Server attacks and, for the first time, it also accused the Chinese government of employing hackers to carry out the attacks, releasing a report that puts on guard against continued defense targeting by China. , semiconductors, medical and other industries in order to steal intellectual property.

The views, thoughts and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Selva ozelli, Esq., CPA, is an international tax lawyer and chartered accountant who writes frequently on tax, legal and accounting matters for Tax Notes, Bloomberg BNA, other publications and the OECD.


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