What is sanctions screening?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
Sanctions screening is the process of checking customers and transactions against lists published by governments. In crypto, that means comparing deposit and withdrawal addresses against published address designations. For a user, the value lies in understanding why a deposit might be held.
Key points
- Checking against sanctions lists published by governments
- In crypto, designations are made at the address level
- Registered operators are legally required to perform it
- False positives can put an unrelated deposit on hold
Definition
The procedure of checking whether a customer or transaction counterparty appears on sanctions lists published by national authorities. Registered exchange operators are required by law to carry it out.
Sanctions regimes designate individuals, entities and vessels, freezing assets and prohibiting dealings. For crypto, bodies such as the US Treasury's Office of Foreign Assets Control publish blockchain addresses said to be associated with designated parties, and firms screen against those.
Registered exchanges check counterparty addresses on every deposit and withdrawal, on top of identity verification at account opening. Where a match or a close association is suspected, they may request an explanation or suspend a withdrawal. This is a legal requirement rather than a discretionary business choice.
The point for users is that screening is not exact. A deposit can be held because analysis places it a short distance from a listed address, and that judgement rests on inference. False positives do occur, and uninvolved users have reported being asked to explain funds they received legitimately.
Watch out for
- · This article explains the regime; it contains no information on evading sanctions
- · Keep a note of how unexpected incoming funds arrived — the record makes explanations easier
- · Lists and practices are updated, so rely on the authorities' own publications