Global Drug Syndicate Targeted in U.S. Enforcement Operation

The Office of Foreign Assets Control (OFAC) has once again taken rigorous steps to combat drug trafficking fueled by virtual currencies. In a recent enforcement action, OFAC imposed sanctions on 28 individuals and entities implicated in the global proliferation of illegal narcotics. Notably, among these targets is a China-based network responsible for the large-scale production and distribution of substantial quantities of fentanyl, methamphetamine, and MDMA precursors. Moreover, they also added 17 virtual currency addresses to its Specially Designated Nationals List (SDN).

The targeted networks have been involved in trafficking xylazine and nitazenes into the United States. Xylazine, known as "tranq," and the “zombie drug”, is a potent veterinary sedative increasingly misused by drug traffickers who mix it with illicit fentanyl, creating a highly dangerous combination. Nitazenes, on the other hand, are synthetic, non-fentanyl opioids that are increasingly found mixed with illicit fentanyl and other drugs in the United States. 

Analysis of On-chain Interactions

These groups communicate with their co-conspirators via encrypted messaging. They send and receive funds through virtual currency, bank wire transfers, and other financial transactions. 

The interactions encompass both direct and indirect engagements with darknet entities such as the Hydra Market, as well as substantial interactions involving entities based in Russia and China. Additionally, there have been notable connections with coin mixers, pointing to a complex web of transactions.

Over $11 million of funds are currently in the addresses identified and sanctioned in the OFAC sanctions list.

How can we help?

To comply with sanctions against illicit actors and their networks, it is necessary to use blockchain analytics solutions that can thoroughly check cryptocurrency addresses and transactions linked to those under sanctions.

Compass - our flagship behavior-based transaction monitoring and reporting solution can efficiently assist compliance teams in inspecting the wallets of potential clients and customers in order to uncover any past direct or indirect relations with the wallets of sanctioned parties.  We immediately tagged sanctioned addresses in our system and assigned them as “Sanctions” with the “OFAC” subtype. The risk level sanctioned addresses are escalated to “Critical Risk” in our system. As an additional compliance measure, addresses that have or have had any exposure to the sanctioned addresses, directly or indirectly are flagged with new alerts per your business’s risk policies.

Moreover, our blockchain forensics solution ‘Tracker’ helps spot sanctions evasion by detecting funds that have been transferred through several intermediary addresses, known as hops, before reaching a cryptocurrency exchange or a financial institution. Tracker can also help investigators visualize the flow of funds associated with and to sanctioned addresses.