The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has issued an advisory on sanctions risks arising from dealings in high-value artwork associated with persons blocked pursuant to OFAC’s authorities, including persons on OFAC’s List of Specially Designated Nationals and Blocked Persons. This applies to art galleries, museums, private art collectors, auction companies, agents, brokers, and other participants in the art market because high-value artwork transactions may play a role in blocked persons accessing the U.S. market and financial system in violation of OFAC regulations.
These participants in the art market need to maintain a risk-based compliance program to mitigate such risks since the Berman Amendment to the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) does not categorically exempt all dealings in artwork from OFAC regulation and enforcement.
The high value art market is well known for lack of transparency or the identity of buyers and sellers or the past ownership of artwork.As such, the OFAC sees the art market as particularly vulnerable to those engaged in illicit financial activity, including sanctions evasion. Shell companies and intermediaries are also frequently used to purchase, hold, or sell such artworks, as well as to remit and receive payments.
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The Treasury Department has previously warned art and luxury goods dealers to be alert to the schemes of illicit actors who hide funds in high-value assets in an attempt to mitigate the effects of U.S. sanctions. Given the risks associated with such transactions, in 2019 OFAC posted on its website frequently asked questions (FAQs) reminding members of the art community of their sanction compliance obligations with respect to E.O. 13224, as amended, affirming transactions with SDGTs involving artwork or interests in artwork are prohibited, and that U.S. persons who engage in prohibited transactions may be subject to civil or criminal penalties.
Separately, a July 2020 report by the Permanent Subcommittee on Investigations of the Senate Committee on Homeland Security and Governmental Affairs examined how Russian oligarchs designated by OFAC and listed on the SDN List under E.O. 13661, were linked to shell companies involved in high-value artwork purchases. In another example, a March 2020 report of the United Nations North Korea Panel of Experts describes galleries and exhibitions in Beijing and Hong Kong hosting works of art produced by the UN-designated Mansudae Art Studio, an art studio in Pyongyang.6 According to press reporting, North Korea is also known to have earned an estimated tens of millions of dollars in revenues producing and exporting statuary to foreign nations.
The OFAC has provided organizations with a framework for the five essential components of a risk-based sanctions compliance program, that is (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training. These go against the grain of what has, in the past, been a habit of anonymity and privacy in the art market, but the sanctions are significant enough to make a review of the what to require in any art transaction moving forward.Disclaimer: By choosing to lock your ACS tokens with , you accept and recognize that you will be bound by the terms and conditions of your third-party digital wallet provider, as well as any applicable terms and conditions of the Access Foundation. shall have no responsibility or liability with regard to the provision, access, use, locking, security, integrity, value, or legal status of your ACS Tokens or your digital wallet, including any losses associated with your ACS tokens. It is solely your responsibility to assume the risks associated with locking your ACS tokens with . For more information, visit our terms page.
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99% ETH OFAC compliance to slow block time to 3hrs but not censor Josh O'Sullivan · 5 months ago · 2 min read
As the Office of Foreign Assets (OFAC) compliance levels continue to increase on the Ethereum blockchain, a researcher for Scroll ZKp attested to the fact that a censored transaction will still confirm faster on the ETH chain as opposed to a Bitcoin (BTC) blockchain transaction.
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If 99% of Ethereum validators were OFAC compliant, a censored transaction would still confirm faster than a Bitcoin transaction. — pseudo 📜 (@pseudotheos) November 18, 2022
An Ethereum (ETH) block occurs every 13 seconds on average and hundreds of blocks are being validated hourly. Should ETH validators become 99% OFAC compliant, transactions will take an average of three hours — but will still be included in blocks.
Data from inclusion.watch allows visitors to adjust the level of censorship/compliance on the Ethereum network to ascertain the time for a block that is censored by MEV-boost relays to be included in a block.
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As of press time, the average percentage of OFAC-compliant blocks produced has reached 77.82% meaning that it will take over seven minutes for a non-compliant transaction to be included in a block with absolute certainty.
Justin Bons, the CIO of Cyber Capital, contended that a Bitcoin block can take over an hour to process, while a block occurs every 13 seconds on Ethereum. However, the average time to produce a block on Bitcoin has not broken 12 seconds in the last quarter as stated by
I mean it *can* take hours on BTC but that’s an outlier. The fact that at 99% OFAC complaint a txs will still be included with 99.99% certainty is super impressive! That’s doesn’t mean it will be faster than BTC still though… got to be accurate here. pic.twitter.com/XdIRpsq7YI — Akiba.lens (@akibablade) November 20, 2022
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By using the newly created inclusion.watch, which builds on the infamous MEVwatch website, it is possible to review the inclusion probability per number of blocks on a 99.08% OFAC-compliant ETH blockchain.
As seen in the below image, should Ethereum reach 99% compliance with OFAC sanctions, it will take 3 hours and 3 minutes to be sure of a transaction’s inclusion in a new Ethereum block.
Therefore, the argument that Ethereum would still be faster than Bitcoin even if 99% of the network was censored appears to be a falsehood. Outlier blocks on the Bitcoin network may be processed slower but the average time to create a block is much lower.
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What is impressive, as Akiba noted, is that even at 99% censorship, Ethereum will continue to process censored transactions within four hours. The argument that Ethereum is censorship resistant is hard to challenge under this revelation. However, were transactions from Uniswap, Aave, or 1inch a part of the 1% then a 3-hour settlement time would cause serious network issues.
Josh has been writing for a decade and is passionate about mainstream crypto adoption, bringing positive financial change to the masses through crypto and decentralized finance as a whole.Driven by perceived U.S. sanctions overreach, numerous countries now seek to circumvent the dollar-dominated financial system. Emerging technologies are paving the way.
By identifying key players, quantifying relative influence, and assessing the competitive landscape, FP Analytics breaks down complex foreign policy issues by mapping out spheres of influence and the risks and opportunities these topics present. Learn More
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, we examine the forces shaping the global financial landscape and driving the adoption of new financial instruments by major institutions such as central banks, investment banks, and large tech companies as well as individual investors. Part I analyzes the status of the dollar as the world’s reserve currency, details the emerging challenges to the dollar, and walks through China, Russia, and the European Union’s efforts to transform the existing financial system. We also discuss the launch of China’s digital currency and its broad international and domestic implications. A digital renminbi allows the Chinese Communist Party (CCP) to tighten its domestic control and to export its influence internationally, boosting China’s long-term efforts to undermine the dollar and potentially weakening the impact of U.S. sanctions. The launch of China’s digital currency and other central bank digital currencies (CBDCs) around the world, combined with explicit efforts to de-dollarize by Russia and China, all pose threats to the current status quo. New technologies, economic power shifts and geopolitical tensions are driving fundamental shifts in the international financial system. While the international strength of the dollar still grants the U.S. unique privileges, new challenges are rapidly emerging with the potential to completely upend the international financial system as we know it.
The development of new financial technologies and their adoption by nation states and private actors is unleashing transformative effects on the international financial system. Simultaneously, perceived U.S. sanctions overreach under the Trump administration is driving China, Russia, and the EU to seek alternatives to the dollar-dominated financial infrastructure in use today. The incentive to end dollar-reliance, circumvent U.S. sanctions, and boost domestic currencies has led to the development of alternative financial messaging systems, the launching of national digital currencies, and collaborative efforts to de-dollarize foreign reserve holdings. While today the dollar remains the dominant international currency, there
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