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Iranians Use VPNs, Fake IDs to Circumvent International Crypto Exchange Restrictions

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A recent study by TRM Labs has revealed that Iranians are using virtual private networks (VPNs) and fake identification cards to access international cryptocurrency exchanges despite being barred from doing so due to US sanctions.

Bypassing Compliance Checks

The study found that many Iranian users are turning to VPN services such as OpenVPN or Tiket VPN to bypass compliance checks and access foreign exchanges. Online forums and social media groups, including a Farsi-language Telegram group with over 54,000 members, promote the use of VPNs for accessing global cryptocurrency exchanges.

Fake IDs on the Rise

TRM Labs identified individuals selling fraudulent IDs on Telegram, which are designed to give users access to fake identification cards from countries such as Indonesia, Kazakhstan, Colombia, Switzerland, UAE, and Greece. These IDs are used to onboard users onto international exchanges.

Sanctioned Entities Involved

The study also found that in 2022, three entities subject to US Office of Foreign Assets Control (OFAC) sanctions sent funds directly to Iranian cryptocurrency exchanges. The high-risk Russian exchange Garantex accounted for nearly 91% of incoming exposure from sanctioned entities to Iranian exchanges, with over $1.2 million in transactions.

Iranian Individuals on the SDN List

Additionally, two Iranian individuals listed on OFAC’s Specially Designated Nationals (SDN) list sent over $110,000 to Nobitex during 2022. Both individuals are affiliated with the Islamic Revolutionary Guard Corps (IRGC).

Growing Presence of Blockchain Projects in Iran

Despite being a sanctioned jurisdiction and engaging in illicit financial activities, TRM analysis found that the proportion of illicit volume received by Iranian exchanges was slightly lower than the global average in 2022.

The study also highlighted the growing presence of blockchain projects in Iran, including Kuknos and Borna. The Kuknos Network was launched in 2019 by Bank Mellat, Bank Melli Iran, Bank Pasargad, and Parsian Bank, while the Borna platform was developed using Hyperledger Fabric architecture.

Government Interest in Cryptocurrency

The Iranian government has also shown interest in cryptocurrency, with a report from the Central Bank of Iran stating that crypto-related transactions amounted to approximately $197.6 million in the second quarter of the current fiscal year alone. The government has launched a National Task Force on Cryptocurrencies to enhance coordination between institutions on crypto-related matters.

Gold-Backed Stablecoin Development

The development of a gold-backed stablecoin by Iran and Russia, which could be used for cross-border payments, may also present increased sanctions risks.

Conclusion

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In conclusion, the Iranian cryptocurrency ecosystem is evolving rapidly, with significant investment in national projects and relatively low exposure to non-sanctions related illicit finance. However, this also presents compliance challenges for Western exchanges, payment processors, emerging crypto businesses, and others in traditional finance. To support sanctions compliance and investigations teams, TRM offers advanced blockchain intelligence solutions.

Contact us to learn more about how TRM can help you with your sanctions compliance needs.