The US Treasury Department is targeting crypto exchanges in an effort to combat money laundering and cyber attacks.
Why crypto exchanges are a danger to the US
The US Treasury memo states that in the fight against ransomware attacks, crypto exchanges are a critical element. This is because cryptocurrencies are the preferred means for cybercriminals to make ransom payments from ransomware attacks.
Although the government acknowledges that virtual currency activities are legitimate, there are instances where cryptocurrencies are used for illicit activities by malicious actors. It is the responsibility of exchanges to enforce AML and KYC regulations to prevent malicious actors from using their platforms to undermine US security.
The case of SUEX
The first exchange to fall victim to this new approach is the OTC platform SUEX. It reportedly facilitated transactions carried out by hackers responsible for ransomware attacks, in at least eight cases of as many variants.
SUEX appears to be a popular platform for such transactions. In fact, the Treasury Department writes:
“Analysis of known SUEX transactions shows that over 40% of SUEX’s known transaction history is associated with illicit actors. SUEX is being designated pursuant to Executive Order 13694, as amended, for providing material support to the threat posed by criminal ransomware actors”.
Being “designated” means that both the exchange and its users are banned from operating. It also triggers a property freeze. Violators are also subject to penalties.
The battle against cyber attacks
The United States is engaged in a real battle against cyber attacks. For this reason, the authorities urge people not to give in to blackmail: never pay. Secondly, it is essential to protect oneself against threats. This concerns private but also institutional actors.
In addition, it is necessary to report and cooperate with law enforcement agencies to identify those responsible for attacks.
This is not a war confined to the United States. Cyber threats were also discussed at the recent G7 summit in June. The world’s leaders agreed to join forces to counter cyber attacks, not least because of the risks involved in the financial sector.
The G7 Cyber Expert Group (CEG), co-chaired by the Treasury and the Bank of England, met in recent days and agreed that ransomware remains a serious threat and concern.
For their part, as early as 2019 the US through the Financial Action Task Force (FATF) asked other countries to oversee virtual asset providers, including crypto exchanges, to counter the risks associated with illicit transactions.
All have been asked to implement oversight activities and require exchanges to have AML standards. The US intends to continue to do so and discourage the use of exchanges for illicit activities.