Sanctions

Sanctions compliance is mandatory for all crypto-asset service providers. OFAC's SDN list and the EU consolidated sanctions list require CASPs to screen customers and counterparties — and, increasingly, the wallet addresses involved in transactions — against prohibited parties lists.

The on-chain nature of crypto creates a specific challenge: value can move across blockchain addresses faster than sanctions list updates can propagate to screening tools. A wallet that was not sanctioned at the time of transaction may be added to the SDN list the following week. CASPs must maintain documented screening methodology that accounts for this lag.

Travel Rule data creates a second sanctions screening obligation: originator and beneficiary information transmitted under the TFR must itself be screened against sanctions lists before a transfer is executed. This is a separate and concurrent obligation from customer screening at onboarding.