Russians Use Tether to Send Money to the West, Evading Sanctions and KYC – Transparency International

EDITOR'S NOTE (March 16, 2023 17:03 UTC): The original version of this article stated Transparency reached out to the original Telegram account of Suex. The passage has been edited to reflect that it is unclear whether that account belonged to Suex, because a typo in the handle suggests it does not.

The Russian branch of Transparency International, a global anti-corruption nongovernmental organization (NGO), found at least eight over-the-counter (OTC) brokers in Moscow that can sell you tens of thousands dollars in stablecoins for cash and then exchange it in the U.K for pounds sterling – all for cash and without know-your-customer (KYC) paperwork.

In findings shared with CoinDesk, Transparency said it focused on the U.K. because the country has long been a favorite destination for Russian money stashed abroad. That includes Russian firms raising capital investment and Russian oligarchs, like Roman Abramovich, parking their savings in elaborate houses and soccer clubs.

Moving money between Russia and the rest of the world has become more problematic since the Russian invasion of Ukraine last year.

After February 2022, the U.S. and European countries moved to isolate Russia from the global financial system to stifle the money flows helping Russia finance its invasion. A big part of that was cutting most Russian banks off from the international inter-bank money transferring system, the Society for Worldwide Interbank Financial Telecommunication, or SWIFT.

Read more: Anna Baydakova - Coins of War: How Crypto Keeps Feeding Russia's War Despite Sanctions

A handful of Russian banks still can do currency transfers in the SWIFT system, according to the Russian financial news website Banki.ru. But the list does not include the largest banks in the country. Those that still have access to the global system often see their transactions held up with delays, reports show. Foreign banks often subject such transfers to additional checks – sometimes for months.

In addition to that, the European Union last fall banned Russian citizens from European crypto services.

Nevertheless, there are still ways to move tens of thousands in cash across the Russian border without declaring them at customs control. For instance, you could buy the USDT$1.0006 stablecoin for cash in Moscow and then selling it for cash in London. No registration, no identity verification, no licenses, no guarantees.

Moving the money

The first step is to buy USDT, the largest U.S. dollar-pegged stablecoin by market cap, at one of the cash OTC offices in Moscow City, the Russian capital’s cluster of luxury business centers. Then, you need to find OTCs that offer to buy your USDT for pounds sterling.

Transparency found eight such brokers and learned they would process $10,000 and more in crypto: Pridechange, Bitokk, Alfa.exchange, Finex24, Mychange, 24ExPay, Trust-exchange and the sanctioned OTC Suex, which, according to Transparency, keeps operating.

Posing as a prospective client, Transparency researchers texted what appeared to be the Suex official account on Telegram and received a response that it can sell 15,000 USDT for cash in London, for a 1.5% fee. The seller would need to send USDT first and receive cash within five hours from an anonymous courier.

Egor Petukhovsky, Suex's founder, told CoinDesk that Suex ceased operations on Sept. 21, 2021. He said he didn’t know who had access to the Telegram account of the firm.

Telegram users can change names of their accounts and it’s hard to tell who is the actual owner of a certain username. It is possible that Transparency has been talking to a Suex impersonator, because the account billed as the official Suex account contained an easy-to-miss typo:Suex_officlal (with an “l” where the second “i” should be).

Other brokers offer similar terms: commission between 1% and 3%, and same-day delivery in an agreed location in London. Clients need to send a photo of any banknote with a serial number and show it to a courier when they meet their counterparty. Sometimes, couriers would also ask for a description of a client’s clothing to recognize them on the street, Transparency told CoinDesk. But no ID is required.

Transparency’s researchers identified 15 crypto wallet addresses belonging to the OTC firms. According to Transparency’s calculations, the most active wallets received and sent out $420,000-$470,000 a month.

CoinDesk looked into the wallets Transparency identified. They mostly sent funds to several crypto exchanges: Huobi, Binance, WhiteBit and two Russian exchanges, MEXC and Garantex (sanctioned by the U.S. in April 2022), according to the Crystal Blockchain analytics firm.

For example, Trust-exchange is an OTC offering to redeem USDT for euros in Prague, in the Czech Republic, Transparency learned. The USDT wallet Trust-exchange provided processed more than $3.7 million since last April, according to the blockchain data.

Alfa.exchange, whose wallet processed over $1.8 million in USDT since October, offers a broad range of options for cash deals. According to the website, users can sell USDT and get cash delivered to them in various cities in Russia, the U.S. and Europe. When a Transparency researcher asked about a delivery location in London, the firm suggested meeting a courier in London’s Norbury area, at a local gym.

Other OTCs that offered pound sterling cashouts include 24ExPay, which has processed more than $7.2 million USDT through its USDT wallet since September 2021, and Pridechange, whose wallet received and sent over $3.7 million since its first transaction in April, 2022.

Using such brokers puts risks on users, who need to trust the anonymous counterparty behind a Telegram nickname, because the seller sends crypto first and receives cash hours later. However, Transparency’s investigation shows that while political sanctions might be a powerful tool to limit money flows to a punished jurisdiction, they usually fail to stop the flow of unidentified funds completely.