TRM Labs confirms “Tornado Cash is different” in response to OFAC sanctions

Watch this exclu­sive inter­view with TRM Labs for a deep dive into how major DEXs dealt with OFAC sanc­tions with­in the cryp­to ecosystem.

TRM Labs is a blockchain intel­li­gence com­pa­ny that helps detect blockchain-relat­ed risks for finan­cial insti­tu­tions, cryp­to-native busi­ness­es, and gov­ern­men­tal entities.

The com­pa­ny offers a vari­ety of ser­vices, includ­ing assess­ing the risk pro­files of vir­tu­al asset ser­vice providers and oth­er cryp­to busi­ness­es, inves­ti­gat­ing the source and des­ti­na­tion of cryp­to funds, and mon­i­tor­ing trans­ac­tions. TRM Labs can run all its func­tions cross-chain as well.

Tornado Cash API

Fol­low­ing the Tor­na­do Cash sanc­tions, TRM Labs was high­light­ed as one of the play­ers involved in cen­sor­ing address­es in rela­tion to plat­forms such as Uniswap and Aave. Red­bord stat­ed, in this exclu­sive inter­view with Cryp­toSlate, that TRM Labs under­stands that “Tor­na­do Cash is dif­fer­ent” with respect to the OFAC sanctions.

Pre­vi­ous­ly, sanc­tioned enti­ties had been cen­tral­ized in nature and almost exclu­sive­ly used for mon­ey laun­der­ing or oth­er crim­i­nal pur­pos­es. How­ev­er, Tor­na­do Cash has legit­i­mate use cas­es where users want to remove vis­i­bil­i­ty from the coun­ter­par­ty to a trans­ac­tion. A sim­ple exam­ple is where an employ­ee wants to be paid in cryp­to but not for their employ­er to see their wal­let balance.

In the inter­view, Red­bord estab­lished that TRM Labs is a tech com­pa­ny first, with the team root­ed in Sil­i­con Val­ley. It shares the vision of a decen­tral­ized future, but its goal is to facil­i­tate the tran­si­tion by endeav­or­ing to remove bad actors from the cur­rent iter­a­tion of web3.

Anti-money laundering for crypto

The com­pa­ny believes blockchain will bring inclu­siv­i­ty to all in the world while acknowl­edg­ing that it’s still an unmarked ter­ri­to­ry with sig­nif­i­cant poten­tial risks. TRM Labs sets off with the mot­to, “Crypto’s promise is too valu­able to leave the risks unchecked.”

TRM Labs‘ Head of Legal, Ari Red­bord, describes the com­pa­ny by saying:

“We’re anti-mon­ey laun­der­ing for crypto.”

The com­pa­ny works with law enforce­ment, cryp­to-native busi­ness­es, and tra­di­tion­al finan­cial insti­tu­tions. TRM labs also works with law enforce­ment to trace the flow of illic­it funds and col­lab­o­rates with DeFi pro­to­cols, exchanges, and NFT issuers to mon­i­tor trans­ac­tions to make sure every­thing runs on track. Final­ly, the com­pa­ny works with finan­cial insti­tu­tions to help them adopt crypto.

Compliance with the sanctions

Red­bord men­tioned that even though TRM had a vari­ety of prod­ucts that it offered to dif­fer­ent types of orga­ni­za­tions, its sanc­tion com­pli­ance API was one of the most suc­cess­ful ones.

Soon after Rus­sia got sanc­tioned by the major­i­ty of the world for invad­ing Ukraine, TRM labs built a data-feed­ing API to list that includ­ed all the cryp­to wal­let address­es of the sanc­tioned indi­vid­u­als. They opened it to the usage of small exchanges that didn’t have a large legal team. The com­pa­nies who use this API basi­cal­ly use TRM’s data to decide whether to sanc­tion some­one or not.

Accord­ing to Red­bord, that prod­uct has been top-rat­ed late­ly, and its scope has increased with all applic­a­ble sanc­tions, includ­ing the ban on Tor­na­do Cash. Explain­ing TRM Labs’ take on the con­tra­dict­ing Tor­na­do Cash ban, Red­bord said:

“We can pro­vide more and more gran­u­lar data to allow com­pa­nies to make deci­sions that aren’t just auto­mat­ed or just block any­one who’s been dusted.”