Why AA Makes Sanctions Enforcement a Technical Nightmare

Gas fees are paid by a third-party Paymaster, not the user. This severs the direct on-chain link between a user's assets and their transaction activity.

• Obfuscates Funding Source: A sanctioned entity's transaction appears to be funded by an innocuous, whitelisted Paymaster contract.
• Enables Meta-Transactions: Users can transact with zero native tokens, eliminating a critical forensic footprint.
• Breaks Heuristic Analysis: Compliance tools that track gas payment patterns for risk scoring are rendered useless.

User identity is decoupled from a persistent EOAs and embedded in a disposable, upgradeable smart contract wallet.

• Dynamic Address Rotation: A user's operational address (the smart account) can be changed or deleted, while their asset vault remains separate.
• Social Recovery Blurs Ownership: A wallet's signing keys can be rotated via social recovery, making permanent attribution of activity to an individual legally tenuous.
• Batch Operations Mask Intent: A single UserOp can trigger multiple actions across protocols (e.g., swap on Uniswap, bridge via LayerZero, deposit on Aave), creating a complex, non-linear transaction graph.

Bundlers and Paymasters become forced intermediaries in a sanctions regime, facing legal liability for processing transactions they cannot decipher.

• Intent-Based Obfuscation: Users submit signed 'intents' (e.g., 'I want X token') to off-chain solvers like those in CoW Swap or UniswapX. The solver's complex, optimized path to fulfillment is the actual on-chain transaction, not the user's original request.
• Bundler Blindness: A Bundler aggregates UserOps for efficiency; it cannot feasibly analyze the nested intent and final state change of every transaction in a bundle for compliance.
• Global Jurisdictional Arbitrage: Services can be hosted in uncooperative jurisdictions, creating enforcement dead zones.

Traditional MEV searchers execute your exact transaction, linking your wallet to the trade. UniswapX and CowSwap use intents: you submit a desired outcome, and a network of solvers competes to fulfill it. The winning solver's address is the only one that touches the chain, severing the direct link between the end-user and the final on-chain action. This creates a mixer-like effect for everyday DeFi activity.

• Breaks Transaction Graph Analysis: The user's EOA is not the transaction signer.
• Solver Networks as Natural Mixers: Hundreds of solver addresses obfuscate the origin of capital flow.

ERC-4337 smart accounts separate the signing key from the account ownership. A user can set a social recovery module where 3-of-5 guardians can rotate the active signing key if the primary one is compromised—or sanctioned. This turns a static target (a private key) into a dynamic, reconfigurable entity. Enforcement requires freezing the immutable smart contract, which would censor all users of that account factory, not just the targeted individual.

• Dynamic Identity: A sanctioned signing key can be invalidated without moving assets.
• Collective Censorship Risk: Targeting requires blacklisting entire infrastructure providers.

In the ERC-4337 stack, the Bundler pays gas and the Paymaster can sponsor fees. A user's transaction is wrapped by these two intermediary actors before hitting the public mempool. For a regulator, the on-chain transaction origin is the Bundler's address, a shared infrastructure piece used by thousands. Tracing requires compelling the Bundler and Paymaster for off-chain logs, which can be designed to be ephemeral or jurisdictionally elusive.

• Infrastructure-Level Obfuscation: User activity is masked behind shared service provider addresses.
• Off-Chain Data Choke Point: Critical attribution data exists outside immutable ledgers.

Modern cross-chain bridges like Across and messaging layers like LayerZero are integrating intents. A user signs a message authorizing a cross-chain swap; a solver network fulfills it. The source chain sees a deposit to a solver, the destination chain sees a withdrawal from a solver. The user's address never appears on the destination chain. This makes cross-chain sanctions tracing a correlated data problem across multiple opaque solver networks and chains.

• Destination-Chain Anonymity: Receiving address has no on-chain link to the source.
• Multi-Chain Correlation Required: Enforcement needs perfect, synchronized chain analysis across all involved L1s and L2s.

Smart accounts can have arbitrary logic. A wallet can be programmed to automatically route all transactions through a privacy mixer like Tornado Cash or a decentralized VPN payment channel after a certain threshold. This turns privacy from an opt-in behavior into a default, unstoppable protocol-level rule. Attempting to block the smart contract triggers the very censorship-resistance properties the blockchain is designed to protect.

• Automated Compliance Evasion: Sanctioned addresses can be programmed to auto-obfuscate.
• Upgradable Logic: The privacy rule-set can change post-deployment without migrating assets.

Social recovery and multi-sig guardianship rely on off-chain attestations (e.g., Sign-In with Ethereum, Ethereum Attestation Service). These attestations mapping social identities to wallet addresses are stored on decentralized networks like IPFS or Ceramic. A regulator must now pursue data across a global P2P storage network and multiple jurisdictional guardians to map an identity, making a single legal request ineffective.

• Data Sovereignty Fragmented: Identity graphs are stored on globally distributed, immutable file systems.
• Multi-Jurisdiction Enforcement: Guardians can be spread across non-cooperative legal regimes.

AA shifts the unit of control from the EOA (Externally Owned Account) to the smart contract wallet. A sanctioned EOA can now be a dormant key to a constantly rotating set of smart contract addresses, making blacklisting ineffective.

• Key Problem: Static address lists become obsolete.
• Key Insight: Enforcement must target logic, not identifiers.

Inherited security models like social recovery wallets (e.g., Safe{Wallet}) or programmable multi-sigs distribute ownership. A sanctioned entity's key can be cryptographically revoked by other signers, transferring full asset control without an on-chain transaction from the blacklisted address.

• Key Problem: Asset ownership becomes fluid and contestable.
• Key Insight: Sanctioning a key does not freeze the treasury.

Solving via intent-based architectures (UniswapX, CowSwap, Across) and account abstraction bundlers separates user goals from execution. A user submits a signed intent; a third-party solver fulfills it. The sanctioned user's assets never move directly—compliance tools see only the solver's address.

• Key Problem: Transaction graph analysis is blinded.
• Key Insight: Enforcement must move to the intent layer, which is currently non-standardized.

Sponsored transactions via paymasters allow a third party to pay fees. A sanctioned user can transact with zero gas footprint from their own address. The funding trail points to the paymaster's wallet (e.g., a DApp or relay service), creating a clean money flow.

• Key Problem: Financial trail terminates at a compliant service.
• Key Insight: Fee payment is a powerful vector for obfuscation.

AA enables custom signature schemes (BLS, Schnorr, MPC). A single transaction approval can be split across multiple sessions or devices, with the final signature bearing no resemblance to the original EOA's cryptographic fingerprint. Existing chain analysis heuristics fail.

• Key Problem: Signature-based detection is rendered useless.
• Key Insight: Cryptography itself becomes a moving target.

AA wallets like Safe{Wallet} are native cross-chain. A sanctioned asset position on Ethereum can be liquidated via a gasless signature to a bundler on Polygon, with funds bridged to Avalanche via LayerZero. Each chain sees a compliant, isolated segment of the activity.

• Key Problem: Jurisdictional fragmentation amplifies the issue.
• Key Insight: Global blacklists require universal, synchronous chain state—an impossibility.