U.S. Treasury Sanctions Russian National for Crypto Laundering Scheme

The U.S. Treasury has sanctioned a Russian national working at Polyus, Russia’s largest state-owned gold producer, for involvement in a complex crypto laundering scheme.

On January 12, the U.S. Department of Treasury announced another package of sanctions against 300 individuals and entities to restrict the ability of the Russian military-industrial base to take advantage of certain U.S. software and information technology as the country completes its transition to a full war economy.

According to blockchain intel firm TRM Labs, the Office of Foreign Assets Control (OFAC) targeted Russian national Andrey Sudakov, an employee of Polyus, and his Hong Kong-based associate Mu Xiaolu. They were engaged in a complex, multi-layered laundering scheme where payments from the sale of Russian-origin gold were converted into fiat currency and cryptocurrencies through numerous UAE and Hong Kong-based front companies.

The Treasury’s press release indicated that Hong Kong-based VPower Finance Security Hong Kong Limited was involved in transporting the Russian-origin gold. TRM Labs noted that VPower also offers blockchain-based logistics services, allowing customers to customize the collection and delivery of valuables through a mobile application. It remains unclear if VPower’s crypto-related services were involved in the scheme mentioned by OFAC.

TRM Labs highlighted that the laundering schemes seen in this case are consistent with patterns the firm has observed, such as Chinese electronics manufacturers being used for Russia’s war effort. This includes Chinese companies shipping parts to Russia, the involvement of Chinese middlemen, coordination between Russian and Chinese logistics companies, and Russian cryptocurrency traders facilitating payments to companies in China.

“By increasing the sanctions risk for foreign financial institutions and restricting access to critical technologies, the U.S. and its allies intend to diminish Russia’s capacity to sustain its aggression against Ukraine.”

This move continues a series of sanctions aimed at limiting Russia’s military capabilities. In early May, OFAC sanctioned the Russian developer of unmanned aerial vehicles (UAVs), OKO Design Bureau, which reportedly operated a Telegram channel soliciting donations in cryptocurrency, according to blockchain forensics firm Chainalysis.

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