Sanctioned jurisdictions account for 39% of illicit crypto transactions

Jurisdictions and entities sanctioned by the US Office of Foreign Assets Control (OFAC) received $15.8 billion in cryptocurrency transactions in 2024, accounting for 39% of all illicit crypto activity that year, according to a report by blockchain analytics firm Chainalysis.

According to the report, residents of sanctioned jurisdictions like Iran turned to cryptocurrency amid restrictive economic environments. As a result, Iranian centralized exchanges (CEXs) recorded a surge in both usage and outflows, “with transaction patterns suggesting capital flight.”

In 2024, OFAC’s crypto-related sanctions moved beyond individuals and small groups to target the financial infrastructure supporting illicit activity, as shown in the graph below:

While the total number of sanctioned entities went down in 2024, the financial footprint of the organizations remained substantial.

The US sanctions on Russia were aimed at reducing the use of crypto in funding the war against Ukraine, illicit cyber activities and organized crime networks. However, KB Vostok OOO, a sanctioned Russian unmanned aerial vehicle (UAV) manufacturer, managed to circumvent the financial blockade.

Through an onchain investigation, Chainalysis found that KB Vostok sold drones with the help of local exchanges:

“This counterparty has processed nearly $40 million in transfers and used multiple deposit addresses at the sanctioned Russian exchange Garantex, which has handled over $100 million in cryptocurrency, suggesting potential involvement of Russia’s military procurement network.”

Safeguarding wealth and circumventing financial restrictions

The report also linked various other unlicensed Russian crypto exchanges and sanctioned entities to aid the alleged laundering of millions of dollars worth of illicit funds. 

Despite an increase in non-Know Your Customer (KYC) crypto exchanges, the sanctions enforcement resulted in an overall decline in inflows. The report states:

“Many individuals and businesses in these regions turn to cryptocurrency to preserve wealth, move funds across borders, and circumvent government-imposed financial controls — an adaptation we have identified in Iran.”

Additionally, crypto-mixing services such as Tornado Cash pose a significant challenge to the enforcement of sanctions, given their ability to anonymize the source of transactions. While authorities managed to temporarily reduce the use of Tornado Cash, Chainalysis reported an uptick in its usage in 2024.

“In 2024, inflows (to Tornado Cash) surged by 108% compared to the previous year, continuing the rebound trend we first identified in last year’s Crypto Crime Report.”

The increase was attributed to stolen funds, perpetrated by various hackers, including North Korea-linked Lazarus Group.

However, as the focus on compliance increases, the exposure of offshore crypto exchanges with Iranian services is on a steady decline. 

“The measurable decline in exchange interactions with Iranian services speaks to the tangible impact of compliance measures in limiting exposure to sanctioned jurisdictions.” the report said.

The new Trump administration reinstated the “maximum pressure” campaign on Iran to be enforced by the US Department of Justice.

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