The Australian Sanctions Office (ASO) has issued an advisory for Digital Currency Exchanges (DCEs). The advisory underscores the importance of adhering to Australian sanctions laws, which are applicable not only within Australia but also extend to activities carried out by Australian citizens, registered entities overseas, and on Australian-flagged vessels and aircraft.
The advice contains a number of key takeaways:
Adherence to Compliance Obligations: Like all other Australian persons and entities, DCEs are required to abide by Australian sanctions laws and to prevent the criminal abuse of crypto-assets. These laws are not limited to activities within Australia but also encompass those undertaken by Australian citizens and entities overseas, as well as on Australian-flagged vessels and aircraft;
Cryptocurrencies as Assets: Under sanctions laws, cryptocurrencies are treated as assets. It is considered an offence to make these assets available to designated individuals or entities (a list of whom the ASO updates regularly), or to engage in transactions involving cryptocurrencies owned or controlled by such designated parties;
Due Diligence Measures: DCEs are expected to exercise reasonable precautions to prevent facilitating transactions involving designated entities. This includes freezing cryptocurrencies controlled by designated entities and reporting such instances to the Australian Federal Police (AFP) and ASO;
Integration with AML/CTF Programs: DCEs are required to integrate sanctions compliance into their Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) programs. This includes wallet and customer screening, transaction monitoring as part of ongoing due diligence, IP-based login restrictions and complying with reporting obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006;
Risk Mitigation Strategies: DCEs are advised to implement pre- and post-transaction screenings, monitor high-risk jurisdictions, and enhance due diligence for transactions potentially linked to sanctions evasion activity; and
Penalties: Violations of sanctions laws are considered serious criminal offenses, attracting penalties that include fines and imprisonment.
In conclusion, the advisory serves as a reminder for DCEs to remain vigilant and proactive in their compliance efforts, given the evolving landscape of digital currencies and sanctions laws. In addition to the existing regime and laws that apply to DCEs, the implicit additional scrutiny that the ASO (and presumably other regulators of Australia) is placing upon DCEs means that DCEs should assess their own level of exposure to Australian sanctions laws and ensure they have appropriate risk based processes in place to mitigate the risk of breaching sanctions regulations. If you are in doubt as to whether a particular transaction is permitted under sanctions regulations, DCEs are encouraged to seek professional advice.
By Luke Higgins and Steven Pettigrove