Russian Smuggler Leverages Tether to Evade Sanctions

Andrey Zverev, self-described as a smuggler for illicit Russian activities, has reportedly been leveraging Tether to carry out purchases of high-tech equipment and components for weaponry, thereby sidestepping Western-imposed sanctions.

According to a report by The Wall Street Journal, Zverev acts as an intermediary for Russian entities, employing Tether for transactions involving substantial sums. For instance, he facilitated a multi-million dollar transfer from Kalashnikov Concern, Russia’s largest producer of small arms, to an electronics vendor based in Hong Kong.

Communications revealed on Telegram show Zverev’s strategy of converting rubles into Tether to remit payments to overseas suppliers, primarily in China and the Middle East. This approach has enabled Russian businesses to persist in their operations despite the sanctions.

The U.S. Treasury Department is advocating for new legislative measures to permit the blocking of transactions involving U.S. dollar-backed stablecoins such as Tether. Following these concerns, the department recently sanctioned a Moscow-based firm for its reliance on Tether for payments.

Brian Nelson, the Treasury’s Undersecretary for Terrorism and Financial Intelligence, remarked, “Russia’s adoption of alternative payment methods to bypass U.S. sanctions facilitates the continuation of its military engagement in Ukraine.”

The manipulation of cryptocurrencies to evade sanctions and support illegal activities is a global issue. North Korea, for instance, has amassed billions in cryptocurrency to bolster its weapons program, prompting calls from the UN for tighter control over crypto transactions.

You might also like: Binance seeks new buyer for Russian business following CommEX closure. Concurrently, Russia is striving to position itself as a key player in the international cryptocurrency space, announcing initiatives to launch a new global currency, encourage mining operations, and ease cross-border crypto transactions.

After the outbreak of the conflict in Ukraine, western countries initiated a strict sanctions regime against Russia, highlighting the urgency of addressing the misuse of digital currencies.

The backdrop of heightened scrutiny led the U.S. Treasury Department to take decisive action. In March, the department expanded its sanctions list to specifically target 13 companies and two individuals deeply embedded in the cryptocurrency trading space.

Meanwhile, the broader implications of cryptocurrencies being exploited for illicit purposes have not gone unnoticed. Among those voicing concerns is Ethereum co-creator Vitalik Buterin, who has suggested the adoption of “privacy pools” as a strategy to improve the cryptocurrency market’s transparency and reliability. The proposal aims to eliminate dishonest traders from the crypto space.

Read more: Crypto custodian Copper reportedly transferred over $4m to entity allegedly tied to Russian arms-dealing network.