Want to be rich? Get Sanctioned!
Sanctions are one of the primary tools used by regulators to put pressure on individuals and entities. Though often used as a political act to force policy on foreign countries, the result in many cases have an entirely opposite effect.
Nominis findings: Garantax
Garantex was sanctioned in 2022, after findings revealed that over $100 million Garantex transactions were associated with illicit actors and darknet markets.
Since the sanctions were applied, its business has been thriving. The company is switching wallets almost every day and sending funds to mainstream exchanges daily. Given it's relocation to Moscow, there have even been rumours that the exchange is being used to assist Russia in evading international sanctions, and potentially funding military activities in Ukraine. Ironically, Garantex's sanctioned status has potentially allowed it to play a role in evading Russia's sanctions.
Over the last WEEK Garantex processed deposits of over $10,000,000, and eventually, millions of those funds landed in legit exchanges (With under 10m AUC, 10m - 1B AUC, and also over 1B AUC). Sanctions on crypto exchanges often lead to an increase in revenue for the entity.
Why?
Firstly - sanctions allow the company to fire the entire compliance team, who cost them millions of dollars every year.
Secondly - Crypto sanctions are like VASP Licenses for criminal activities: this is a stamp that they can safely use this business to launder their funds.
Instead? Legit exchanges need to take the burden of digging into transactions in order to avoid sanctions evasion.
In addition, the OFAC list contains only a small amount of wallets; while the actual amount of wallets that are linked to sanctioned entities and individuals under sanctions is estimated to be ~10m according to Nominis, meaning that without a proper KYT solution, exchanges are struggling to fully comply with OFAC.
The attached photo shows interactions of Garantex with exchanges from all over the world (from the last 7 days), each node represents a different exchange, and there are 2 additional exchanges that don't appear on the chart. Overall, over 15 different exchanges received hashtag#USDT from Garantex during the last 7 days, and according to the withdrawals distribution, any exchange could be the next sanctions evasion victim...
Now this leaves the question: are sanctions a curse or a blessing?
