Cryptocurrency transactions not only involve ML/TF risks, but also the risk of violation of the sanctions regulations. The Dutch financial regulator De Nederlandsche Bank (DNB) has recently issued a Q&A document detailing how the providers of crypto services can implement sanctions screening for cryptocurrency transactions. Highlights from this document are shared below.
The nature of crypto services entails a high risk due to a level of anonymity for the holder of a crypto address and transactions. There are different risks related to each type of cryptocurrency transaction. The cryptocurrency service provider must make an assessment of the risks and take appropriate measures to mitigate them.
Additionally, providers must monitor whitelisted crypto addresses using monitoring software, both before and after cryptocurrency transactions. It is also prudent to block crypto addresses linked to sanctioned entities. Moreover, providers can conduct random checks to determine whether the counterparty specified by the customer is truly the recipient/sender.
Source: DNB, Netherlands