US regulators are keeping an eye on the crypto sector
US regulators are keeping an eye on the crypto sector. In her monthly expert column, Selva Ozelli, international tax lawyer and CPA, deals with the interface between new technologies and sustainability and offers the latest tax crypto developments, AML / CFT regulation and regulatory issues affecting cryptocurrencies and blockchain crypto.
Recently, the headlines in the news have focused on regulatory concerns about the lack of investor protection in the cryptocurrency market, which has grown to over $ 2 trillion, and the risks involved.
National security agencies in President Joe Biden’s administration are grappling with known cases where cryptocurrencies have played a role in ransomware attacks, intellectual property espionage, arrest warrant violations, sanctions, bribery of government officials and tax evasion.
According to a recent report released by the Financial Crimes Enforcement Network, ransomware-related suspicious activity reports filed in the first half of 2021, a 30% increase over full year 2020, show that ransomware is a growing threat to the US financial industry. , Economy and public
The Biden government is considering an executive order for federal agencies to investigate and make recommendations on relevant areas of the crypto industry related to national security, economic innovation, and financial regulation. The initiative will also aim to coordinate the work of digital currency agencies across the executive branch, with a first White House crypto expert taking the lead.
“Pandora Papers” from the International Association of Investigative Journalists
The International Association of Investigative Journalists published the Pandora Papers, which leaked nearly 12 million documents from law firms and other organizations around the world, exposing the previously unknown owners of 29,000 offshore companies that have US $ 32 trillion in assets worldwide. Hide dollars from taxation or government control in tax havens.
The owners of these companies include celebrities, political leaders and criminal figures of the underworld from more than 200 countries. The leak has opened investigations into corruption and tax evasion against several government officials worldwide.
Meanwhile, a report from the World Economic Forum explains how blockchain technology can help eradicate corruption in governments.
Related: CFTC renewed: Biden’s new agency decides which crypto regulation it wants to maintain
OFAC of the US Treasury Department
In a first case, the Office of Foreign Assets Control (OFAC) recently targeted Suex, an over-the-counter digital currency broker, for its alleged role in laundering the proceeds of ransomware attacks. The effort is part of the government’s efforts to combat ransomware and disrupt criminal networks and cryptocurrency exchanges that play a role in ransom laundering. The aim is to improve cybersecurity in the private sector and to increase reporting of ransomware incidents and payments to US government agencies. This includes both the Treasury Department and law enforcement agencies under the Anti-Money Laundering and Terrorist Financing Framework (AML / CFT), as digital currency is the primary tool used to facilitate payments, ransomware payments and related money laundering activities.
Following this case, OFAC published an “Updated Notice on Potential Penalty Risks to Facilitate Ransomware Payments”. The updated notice highlights that the U.S. government still discourages payment of cyber ransom or extortion requests and recognizes the importance of improving cybersecurity practices to prevent or reduce such attacks.
Related: Compliance with sanctions for fiat and crypto transactions is the same
OFAC also updated its recommendations to emphasize the importance of reporting and working with the appropriate government and law enforcement agencies in the event of a ransomware attack to understand potential threats, ransomware attacks and malicious network actors and victims of the attack and fight. receive a self-disclosure credit if a sanction relationship is later determined. Please visit the Government’s Stop Ransomware website for more information.
Given the financial risks posed by ransomware and money laundering posed by digital assets around the world, participants at the G7 meeting in June pledged to work together to address this escalating risk quickly and efficiently by adopting the Financial Task Force’s AML standards for digital assets and virtual assets implement and enforce asset service providers.
Related: Are crypto ransom payments tax deductible?
Spy on intellectual property and cryptocurrency
In other recent cases and reports, cryptocurrencies have been implicated in intellectual property espionage. Ethereum developer Virgil Griffith recently pleaded guilty to the conspiracy of violating the International Emergency Economic Powers Act, which aims to prevent US citizens from exporting technology and intellectual property to other countries in 2019 as part of a conference Plea agreement threatens Griffith if convicted in January 2022 six and a half years in prison.
Jonathan Toebbe, a US Navy nuclear engineer who keeps top secret security secrets and specializes in marine nuclear engines – and has access to military secrets – was charged in October with providing information about the design of the US nuclear submarine to US nuclear Submarines pass someone. The Justice Department said he was representing a foreign government in exchange for cryptocurrency, in violation of the Atomic Energy Act.
Cybereason, an operational cyberattack protection provider, has released a new report entitled “Operation GhostShell: Novel RAT Targeting Global Airlines and Telecoms,” exposing a highly concentrated cyber espionage operation against global telecommunications and aerospace companies. The report following the company’s “DeadRinger” report released in August revealed that a newly identified Iranian actor named MalKamak was behind the attacks and has been active for at least five years. 2018. MalKamak used a previously unknown, very sophisticated behavior. The remote access Trojan called “ShellClient” is supposed to bypass antivirus software and other security tools and misuses the cloud service provider Dropbox for control and control.
Related: US updates AML / CFT law on cryptocurrencies
According to a study by the Slovak security provider ESET, a group of cyber spies called FamousSparov has targeted hotels, international governments, international organizations, engineering firms and public companies since at least 2019 – including suspected exploitation. Chinese hackers and scammers are looking for ways to mine cryptocurrencies – to attack their victims, including the US Republican Governors Association. Although ESET doesn’t associate FamousSparow with any specific country, it has found similarities between its techniques and those of SparklingGoblin, a subsidiary of the Winnti Group – with links to China – and DRBControl.
In July, the US government blamed China for exploiting Microsoft Exchange Server attacks and, for the first time, also accused the Chinese government of using criminal hackers for attacks. , Semiconductor, medical and other industries to steal intellectual property.
Wolkenstein Özelli, Esq., CPA, is an international tax attorney and certified public accountant who regularly writes for Tax Notes, Bloomberg BNA, other publications and the OECD on tax, legal and accounting issues.