Italy Mandates Sanctions Screening for Crypto Transfers Amid Illicit Flow Concerns

Italy's central bank, Banca d'Italia, has issued an order for mandatory sanctions screening on cryptocurrency transfers to prevent illicit flows within the EU. This move aims to curb the use of cryptocurrencies by entities linked to sanctioned countries such as Iran and Russia.

Crypto asset service providers (CASPs) are required to put in place policies and internal controls to enforce EU financial sanctions when processing crypto transactions. The central bank emphasizes the importance of identifying customers and transactions linked to sanctioned entities, ensuring adequate controls are in place.

The use of cryptocurrencies has been on the rise for Iranian and Russian entities seeking to avoid financial sanctions. The A7A5 stablecoin, backed by the Russian ruble, processed $110 billion in cumulative transactions between February 2025 and May 2026, despite being targeted by Western sanctions. Similarly, Iran's central bank has eased foreign currency controls to encourage businesses to use cryptocurrencies like Tether's USDt (USDT) and Bitcoin (BTC) for cross-border transactions.

Recent actions have highlighted the challenge in preventing illicit crypto flows. In July 2026, US Treasury Secretary Scott Bessent announced a freeze of more than $130 million in crypto held in wallets linked to Iran's central bank. Additionally, blockchain analytics company TRM Labs reported over $3.8 billion in transactions between crypto exchange CoinEx and sanctioned Iranian entities over seven years.