The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has taken decisive action against Ekaterina Zhdanova, a Russian national, for her role in laundering and transferring funds through virtual currency on behalf of Russian elites.
This move aligns with the G7’s commitment to combat sanctions evasion and close loopholes used by the Russian state, its elites, proxies, and oligarchs to exploit virtual currency and mitigate the impact of international sanctions, as per the U.S. Department of Treasury on November 3, 2023.
Zhdanova’s role in facilitating illicit financial activity
Zhdanova’s involvement in facilitating illicit financial activity became evident in the aftermath of Russia’s unlawful invasion of Ukraine in February 2022. In March 2022, she assisted a Russian client in hiding the source of their wealth, enabling them to transfer over $2.3 million into Western Europe through fraudulent investment accounts and real estate purchases.
These actions provided Russian individuals access to Western financial markets that might have otherwise been restricted due to U.S. and international sanctions, thereby bypassing the multilateral sanctions imposed on Russia for its unprovoked war.
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Utilization of virtual currency and various methods
Zhdanova leveraged virtual currency to facilitate large cross-border transactions, often through entities lacking Anti-Money Laundering/Combatting the Financing of Terrorism (AML/CFT) controls, such as the OFAC-designated Russian cryptocurrency exchange Garantex Europe OU.
Her methods also included cash transactions and connections to international money laundering associates and organizations. Zhdanova even used traditional businesses, such as a luxury watch company with global offices, to maintain access to the international financial system. However, on September 20, 2023, North Korean hackers employed Russian Crypto exchanges for money laundering, chainalysis says.
Assisting oligarchs and ransomware groups
Zhdanova’s services extended to assisting oligarchs who had relocated internationally, including a Russian oligarch who engaged her to transfer over $100 million in wealth to the United Arab Emirates. She also facilitated a United Arab Emirates tax residency service for Russian clients, potentially assisting in hiding their identities.
Additionally, Zhdanova was involved in money laundering on behalf of individuals connected with the Russian Ryuk ransomware group, laundering over $2.3 million in suspected victim payments for a Ryuk ransomware affiliate that targeted victims globally.
As a result of OFAC’s action, all property and interests in the property of Ekaterina Zhdanova within the United States or under the control of U.S. persons are blocked and must be reported to OFAC. Entities that are 50 percent or more owned by blocked persons are also blocked, and transactions involving designated persons are generally prohibited unless authorized by OFAC.
This action underscores ongoing efforts to protect the international financial system against those exploiting technology and engaging in illicit financial activities. OFAC’s intervention serves as a significant step in combatting sanctions evasion and holding individuals like Zhdanova accountable for their actions.