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CertiK KYC Now Screens for Tornado Cash Wallets in Response to OFAC Blacklist
8/8/2022
CertiK KYC Now Screens for Tornado Cash Wallets in Response to OFAC Blacklist

TL/DR

Tornado Cash is now a sanctioned entity by the United States Office of Foreign Assets Control (OFAC), meaning that no U.S. person can engage in trade, transactions, or other dealings with Tornado Cash. In light of the recent update, CertiK’s KYC on-chain investigation will now detect and analyze any wallet engagement with Tornado Cash, ensuring projects and investors are compliant with the OFAC sanctions. This sanction is amongst a stream of new regulatory proposals and increased law enforcement activity in cryptocurrency which further emphasizes the need for security in Web3.

OFAC and the Tornado Cash Sanction

The Office of Foreign Assets Control (OFAC) is a government agency within the U.S. Department of the Treasury which administers and enforces economic sanctions programs based on U.S. foreign policy. OFAC maintains a Specifically Designated Nationals and Blocked Persons List (SDN) which is a published list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. As a part of the OFAC SDN lists, there are cyber-related designations which specifically list blocked digital currency addresses.

OFAC announced on August 8, 2022, that the agency sanctioned Tornado Cash, a virtual currency mixer that operates on the Ethereum blockchain which obfusticates the origin, designation, and counterparties of transactions. The sanction includes 44 Tornado Cash Ethereum wallet addresses; the full list can be found here.

What Does This Mean for Crypto Investors?

It is now illegal for any U.S. person to engage in trade, economic transactions, or other dealings with Tornado Cash and its associated wallets and smart contracts. Those found in violation of these sanctions can face a maximum civil penalty for a non-egregious case of $330,947 USD, which is detailed further here.

The sanctions against Tornado Cash are among a stream of new regulatory proposals and provisions in the United States, which can be read more about on our blog post here. As United States agencies are becoming increasingly involved in Web3, it’s more vital than ever for projects and investors to pursue the highest level of security practices in this space. CertiK offers a suite of security-based products, particularly the CertiK KYC, which helps establish transparency and due diligence into cryptocurrency projects and teams as regulations increase.

How can CertiK KYC Help?

The CertiK KYC team is made up of a team of experienced law enforcement investigators and military intelligence analysts that conduct comprehensive due diligence KYC investigations into projects. Government officials in the United States, including United States Deputy General, Lisa Monaco, have stated that KYC requirements will be essential as further compliance regulations within Web3 occur. The CertiK KYC is an exceptionally detailed investigation on a crypto project team and all associated wallets, which offers the highest level of due diligence KYC in the market.

As a component of the CertiK KYC, CertiK conducts an on-chain investigation which can detect any nefarious or suspicious transactions. In light of the new OFAC regulations, the CertiK KYC on-chain investigation will now detect and analyze any wallet engagement with Tornado Cash, ensuring projects are compliant with the OFAC sanctions. CertiK’s team of experts can uniquely analyze and identify complex wallets and transactions during on-chain investigation that results in detailed identification of all suspicious transactions in compliance with OFAC regulations. This specific investigative stage of the CertiK KYC speciality ensures compliance through due diligence.

In light of the OFAC sanctions and other regulatory advancements, the CertiK KYC is integral to ensuring the highest level of transparency and security into crypto project teams and activity. While Tornado Cash is now the most recent OFAC sanction, there are likely to be more down the road. In particular, the Secretary of Treasury for Terrorism and Financial Intelligence, Brian Nelson, said regarding the Tornado Cash Sanctions that the “Treasury will continue to aggresivley pursue actions against mixers that launder virtual currency for criminals and those who assist them.” This statement indicates there will be increasing regulation in Web3 against criminal actors and entities. CertiK continues to monitor further regulatory updates and incorporate methods in the KYC process to further refine and remain compliant with these changes.