Sanctions on the Tornado Cash mixer pose compliance challenges, particularly in the case of dusting attacks. This was said by the analytics firm TRM Labs.
The company offers services for meeting the requirements OFAC and anti-money-laundering regulations for Uniswap, Aave, Circle and other firms.
The service helps track addresses and classify them by risk, allowing firms to avoid interacting with laundered funds and unscrupulous actors.
The product also assesses addresses for presence on the SDN list. In such cases, TRM Labs provides data on whether a wallet is sanctioned and whether it has a direct or indirect connection to such addresses.
TRM Labs stressed that the sanctions on Tornado Cash create uncertainty in the context of compliance. This is the first instance of OFAC sanctioning a suite of smart contracts rather than ordinary wallets. With the latter, transactions are typically easy to trace; with smart contracts this will be more difficult.
“The complexity arises from the fact that essentially anyone who funds Tornado Cash interacts with the smart contracts of the mixing service. Theoretically, they can send funds to Tornado Cash and then transfer them to an address belonging to a random, unsuspecting person,” — explained the firm.
This has already happened. The day after enforcement actions, one of the mixer users sent 0.1 ETH to a number of industry luminaries.
Recipients included Coinbase CEO Brian Armstrong, EthHub co-founder Anthony Sassano, crypto trader Loomdart, TV host Jimmy Fallon, YouTuber Logan Paul and Randi Zuckerberg — sister of Meta’s CEO, as well as Tron Foundation founder Justin Sun. The latter’s wallet on Aave was briefly blocked, citing automation of the process.
Some members of the community suggested that such a 0.1 ETH “giveaway” was a kind of protest against OFAC’s actions.
TRM Labs explained that during “dusting attacks” blockchain firms cannot reject transactions without regulatory guidance. Compliance teams will be forced to analyze transfers to ensure they meet the requirements on a case-by-case basis.
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