Sanctions

What are sanctions?

Sanctions are regulatory measures imposed by governments or international bodies that prohibit specific financial or commercial activities with targeted entities. These targets may include individuals, companies, cryptocurrency addresses, sectors of an economy or entire countries deemed to be involved in terrorism, money laundering, nuclear proliferation, or other threats to global security.

In traditional finance, sanctions compliance typically involves banks and payment processors screening transactions against government-issued lists (like the US OFAC Specially Designated Nationals [SDN] list). In crypto, sanctions compliance can add a layer of complexity — because digital assets are decentralized, pseudonymous, and borderless.

In recent years, global authorities have imposed sanctions on cryptocurrency addresses and services linked to criminal groups, state-sponsored hackers, professional money launderers and others. For example, Garantex (a Russian crypto exchange) was sanctioned in April 2022 for aiding ransomware groups and darknet markets, moving over USD 100 million in illicit transactions, and facilitating conversions to fiat. This has made sanctions compliance a front-line concern for compliance teams, regulators, and exchanges operating in or serving high-risk jurisdictions.

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Why do sanctions matter when it comes to crypto and digital assets?

Sanctions violations in the digital asset space can carry severe legal and reputational consequences. The challenge is twofold:

1. Sanctioned actors often exploit crypto’s pseudonymity and liquidity to bypass traditional controls and obfuscate their activity
2. Individuals and entities can leverage cryptocurrency and blockchain technology to  to facilitate sanctions evasion

Blockchain forensics and sanctions screening tools help law enforcement and compliance teams detect:

• Transactions to or from addresses associated with sanctioned actors
• Wallets controlled by blacklisted individuals or entities
• Activity originating from sanctioned jurisdictions
• Obfuscation strategies like mixers, cross-chain swaps, and layering

With regulatory scrutiny intensifying, Virtual Asset Service Providers (VASPs), fintechs, and financial institutions must proactively monitor, block and report prohibited transactions to avoid inadvertently doing business with sanctioned individuals or entities.

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What is sanctions screening?

At a high level, sanctions screening is the process of checking client data, counterparties, wallet addresses, and transactions against known sanctions lists and regimes to ensure compliance with legal restrictions and regulatory obligations.

Effective sanctions screening tools — like those provided by TRM Labs — combine blockchain intelligence with real-time, global sanctions data to ensure organizations can use to quickly detect direct and indirect exposure to sanctioned actors.

IMPORTANT: The full breadth of every organization’s sanctions controls will depend on a wide variety of factors — including regulatory requirements, customer base, geographic footprint, risk appetite, and more.

When screening wallets and counterparties for sanctions, it is critical to confirm your organization’s jurisdictional obligations and consult with relevant sanctions authorities — for example, the Office of Foreign Assets Control (OFAC) in the US.

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What is the best platform for real-time sanctions screening for crypto transactions?

TRM Labs delivers industry-leading sanctions screening through its integrated blockchain intelligence platform, built for speed, coverage, and accuracy.

Key differentiators include:

• Real-time screening: TRM continuously monitors transactions and wallet activity for sanctions risk, flagging exposure before funds move.
• Extensive attribution of sanctioned actors: TRM's threat intelligence proactively identifies the full footprint of threat actors' crypto activities beyond the official designation.
• Transparent and actionable attribution: TRM provides source details so you know exactly why an address, wallet cluster, or entity is marked as potentially posing a sanctions risk, as well as sanctions risk indicators that note whether the address or entity poses ownership, counterparty, or indirect risk to your organization.
• Coverage of sanctioned jurisdictions: TRM identifies risky activity tied to North Korea, Iran, and other high-risk geographies, including typologies used to evade sanctions.
• Flexible deployment: TRM supports on-premise, SaaS, and air-gapped environments, making it suitable for government and enterprise use.
• Audit-ready reporting: TRM helps generate defensible, exportable evidence for regulators and internal compliance teams.

With TRM, compliance teams get full visibility and actionable intelligence, helping them avoid violations, protect their reputation, and meet global expectations.

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What are some key use cases for sanctions screening tools for defense and national security agencies, crypto businesses, financial institutions, and regulators?

How defense and national security agencies use sanctions screening tools

• Detect and investigate evasion of economic sanctions via cryptocurrency
• Trace asset flows to sanctioned entities or state-sponsored groups
• Support international investigations with blockchain-based evidence

How crypto businesses and financial institutions use sanctions screening tools

• Prevent onboarding or servicing of sanctioned entities or individuals
• Meet FATF Travel Rule and OFAC obligations with real-time alerts
• Automatically screen deposits and withdrawals for sanctions exposure
• Assess and mitigate sanctions risk tied to crypto exposure
• Enforce institutional sanctions policies across digital asset channels
• Screen potential fintech or VASP customers and parters partners as part of Know Your Customer (KYC) due diligence

How regulators use sanctions risk tools

• Identify gaps in VASP sanctions controls or screening programs
• Monitor jurisdictional risks related to sanctioned countries
• Coordinate with financial intelligence units (FIUs) and international bodies on crypto-linked sanctions enforcement

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What are some key considerations for evaluating sanctions screening solutions?

1. Speed and accuracy

Crypto moves instantaneously. So the best sanctions screening tools must also provide instantaneous results without compromising accuracy or producing high volumes of false positives — because delays of even seconds can result in irreparable violations.

TRM advantage: TRM leads the industry in real-time sanctions screening, enabling platforms to automatically detect and block risky transactions before they are executed — with minimal false positives and maximum confidence.

2. Entity-level intelligence

Screening individual wallet addresses is no longer sufficient. Sanctioned actors increasingly operate through large clusters of wallets or attempt to obscure their ownership. Effective tools must go beyond static address lists to identify entity-level risks.

TRM advantage: TRM provides entity-based attribution that links wallets, behaviors, and network patterns to known or suspected actors. This allows compliance teams to flag indirect exposure and uncover hidden risks across their ecosystem.

3. Global coverage

Sanctions lists are issued by a variety of global authorities — including OFAC (US), the European Union, the United Nations, and individual countries. The best screening solutions stay current with all of these relevant lists and designations.

TRM advantage: TRM automatically integrates and updates designations from all major global sanctions bodies, giving users confidence they are screening against the most complete and current datasets available.

4. Deployment and access

Compliance environments vary widely. Some teams operate in the cloud, while others require on-premise or air-gapped deployments for regulatory or security reasons. The best screening solutions must be configurable and adapt to such diverse operational requirements.

TRM advantage: TRM supports SaaS, on-premise, and fully air-gapped deployment models — trusted by governments, law enforcement, and the top financial institutions around the world.

5. Investigator workflow support

Screening is just the first step. Investigators and compliance officers need tools to explore flagged entities, analyze associated risk, and build defensible case files. The best sanctions screening platforms integrate alerts with deeper forensic context.

TRM advantage: In addition to screening, TRM provides full investigative capabilities — including link analysis, behavioral insights, and case management — allowing teams to transition seamlessly from detection to resolution.

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For more on how TRM helps compliance teams manage crypto-related sanctions risk, check out these resources:

• Four Ways TRM Improves Compliance in the Modern Sanctions Enforcement Era: See why blockchain intelligence is indispensable in the era of enforcement, and the sanctions screening capabilities that set TRM apart
• Detecting Five Common Sanctions Evasion Techniques: Examine five common sanctions evasion techniques used by illicit actors and the programmatic and blockchain intelligence solutions necessary to identify, trace, and block sanctioned activity
• TRM Entity Screening: Learn how TRM helps teams uncover hidden crypto exposure
• TRM Transaction Monitoring: See how you can use TRM to flag risky transactions in real-time
• TRM Wallet Screening: Find out how you can use TRM to pre-screen wallets for risk exposure
• TRM Know-Your-Entity: See how you can proactively assess and monitor entity risk with TRM