Tether Faces Federal Inquiry Over Sanctions and AML Violations

The cryptocurrency firm Tether is currently subject to a federal investigation for potential violations of sanctions and anti-money laundering (AML) regulations, as reported by the Wall Street Journal.

This criminal probe, conducted by prosecutors from the Manhattan US Attorney’s Office, is looking into whether Tether’s stablecoin, USDT, has been used by external parties for illicit activities such as drug trafficking, terrorism, hacking, or to launder illicit proceeds.

Alleged Links To Terrorism And Arms Trafficking

According to the report, the US Treasury Department is contemplating sanctions against Tether due to the cryptocurrency’s extensive use by individuals and groups already sanctioned by the US government.

These concerns include alleged affiliations with terrorist groups such as Hamas and arms dealers in Russia, resulting in increased scrutiny of the issuer of the stablecoin by global authorities.

The report indicates that should sanctions be applied, Tether would face restrictions from engaging in business with US entities, significantly impacting its operations.

Tether Addresses Investigation Allegations

The investigation by the Justice Department into Tether is not a recent development; it began years ago, initially focused on claims that some of Tether’s investors might have engaged in bank fraud through the use of falsified documents to access the global banking system.

In response to the allegations, Tether has asserted that there is no evidence suggesting it is facing a broader inquiry, stating that the claims of facilitating criminal activities or avoiding sanctions are “outrageous.”

In prior statements, the company has emphasized its commitment to collaborating with US and international law enforcement agencies to combat illegal practices, which it believes is evident in its operations.

For instance, the firm has teamed up with analytics organizations like Chainalysis and TRM Labs to bolster transaction monitoring and has effectively frozen wallets linked to criminal organizations in partnership with governments worldwide.

In a response to the report, Tether’s CEO, Paolo Ardoino, took to the social media platform X (formerly Twitter) and stated: