Millions of US dollars worth of cryptocurrency have been sent to centralized exchanges (CEXs), most notably Binance, from wallets that provide funds in support of Russia’s war effort in Ukraine, transaction data suggests. According to Ukrainian analysts, the money was transferred to crypto trading platforms to be laundered.
Over 90% of Pro-Russian Crypto Transfers Identified in Study Submitted to Largest Exchange
Last year, more than $40 million from wallets used to sponsor the Russian invasion of Ukraine were sent to cryptocurrency exchanges, according to an analysis of such transactions by Hapi Labs. The primary purpose of these transfers was to launder the money, it claims. the ukrainian startup in a mail on Twitter posted Tuesday.
While various amounts went to various crypto platforms, nearly 96% of the digital cash found its way to Binance, the world’s largest cryptocurrency exchange. Researchers at the firm, which provides blockchain monitoring tools and data analysis software, believe this is an indication of flaws in anti-money laundering (AML) procedures.
At the same time, the amounts transferred in the opposite direction, from exchanges to wallets used to support Russia’s war against Ukraine, are much more modest, the developers of the decentralized security protocol noted.
“Binance is still among the leaders, but as we can see, it is not the only one. He salutes the bankrupt @FTX_Official and others!” they remarked in another tweet. Two other major centralized exchanges, Kucoin and the European Whitebit with roots in Ukraine, are also in the top five, along with decentralized aggregator 1inch.
Hapi Labs tracked donations of weapons and ammunition destined for the Russian military and various private military companies, including groups associated with the two Russian-backed self-proclaimed republics in the Donetsk and Lugansk regions, Mark Letsyuk, the company’s head of analysis and research, he told cryptocurrency news outlet Forklog.
Wallets involved in funding Russian military aggression are often not blocked by exchanges for more than six months, despite requests from law enforcement authorities, Ukrainian blockchain forensics experts noted.
“Centralized exchanges should block such wallets as soon as possible after notification. But most of the time they are not blocked at all or are blocked very late, when the dirty funds have already passed through them and the account is empty,” Letsyuk added, commenting on the findings.
He also noted that Whitebit is the fastest to respond to alerts from law enforcement agencies and cybersecurity firms while cooperating with Hapi Labs and Ukrainian special services to track and block transactions linked to the Russian campaign.
Binance blames unregulated and sanctioned exchanges
Binance representatives referred to a recent article by Chagri Poyraz, head of its global sanctions team, noting that the platform uses analytical tools from Elliptic, Chainalysis, and TRM Labs to monitor transactions. He also explains that it is not very simple to block incoming transactions which can be investigated only after they have been made.
These funds can be traced, but it is very difficult to freeze or block them, he explained. Poyraz also stressed that unregulated or sanctioned exchanges do not perform know-your-customer (KYC) checks or comply with existing AML rules. And most of them are based in Russia, while some operate from China or India.
Binance also recalled that during the first eight months of the conflict in Ukraine, more than $4 million worth of cryptocurrency was raised in support of pro-Russian organizations, most of which are already under sanctions. According to an Elliptic report published in February 2023, such entities have raised around $4.8 million for the Russian military and associated militias.
Both figures cited are much smaller than the one produced by Hapi Labs, which may indicate that not all of the funds that went through the wallets the company studied represent war-related donations. Both sides in the conflict have been raising cryptocurrency, and according to Elliptic, more than $212 million has been sent to Ukraine.
Do you think that cryptocurrency exchanges have the means to restrict transactions related to the financing of the war in Ukraine? Share your thoughts on the subject in the comments section below.
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