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Chainalysis accelerates launch of 2 free sanctions screening tools

Chainalysis, the blockchain data platform, has announced the accelerated launch of two sanctions screening tools – an on-chain oracle and an API expected to launch next month – for the cryptocurrency industry free of charge.

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Fri, 11 Mar 2022
Chainalysis accelerates launch of 2 free sanctions screening tools
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As countries around the world continue to leverage economic sanctions in response to Russia’s invasion of Ukraine, decentralised web3 groups like DEXs, DeFi platforms, DAOs, and DApp developers are searching for lightweight tools to help them and their customers comply with sanctions policies.

These tools are designed to enable users to easily validate that they are not interacting with cryptocurrency wallets associated with sanctioned entities.

Given the transparency of blockchains, it would be difficult for the Russian government or financial elite to systematically evade sanctions at scale through cryptocurrency without detection. With the traditional financial system, some sanctioned Russian actors may attempt to use cryptocurrency as a means to evade sanctions. All of these transactions would be permanently recorded on the blockchain, providing opportunities to identify and shut down sanctions evasion tactics.

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As seen with sanctions impositions in the past, cryptocurrency compliance professionals with the right data and technology are effective at identifying transactions by sanctioned entities and taking action, according to Michael Gronager, co-founder and CEO, Chainalysis.

“Now is the time for the industry to demonstrate that blockchains’ inherent transparency make cryptocurrency a powerful deterrent to sanctions evasion.

“In anticipation of ongoing sanctions, we’ve prioritised the development of these tools so that all cryptocurrency market participants have what they need to harness this transparency and conduct basic sanctions screening at no cost to them,” Gronager said.

To comply with AML/CFT regulations and sanctions policies globally, most centralised exchanges use transaction monitoring products like Chainalysis KYT, which provides much more extensive data and capabilities.

Many decentralised protocols and platforms that have more recently grown in popularity do not incorporate tools that allow for effective management of sanctions risk.

These new Chainalysis offerings will provide an easy way to conduct basic sanctions checks to help manage reputational and sanctions enforcement risk.

Until now, there hasnt been an easy way to monitor sanctions risk, Corbin Page, founder of Paymagic added, as there are no data sources.

“Chainalysis’ tools will give us the information we need and peace of mind to focus on building our products while preventing exposure to sanctioned entities.

“This is more important than ever in today’s Web3 world,” Page said.

The Chainalysis oracle and API are designed to provide any cryptocurrency business, protocol, or organisation a simple way to quickly check if an address is on a sanctions list before allowing it to connect with their service.

Each aims to use the same data to confirm whether or not the address is on economic/trade embargo lists, such as those of the US, EU, or UN, with which anyone subject to those jurisdictions is prohibited from dealing.

The Chainalysis oracle is a smart contract that can be called from other smart contracts to validate a wallet before allowing an interaction with the second contract.

[Related: Chinese-state-aligned hackers targeting European diplomatic offices]

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