Crypto exchange Kraken agreed to settle with the Treasury Department's Office of Foreign Assets Control over the firm’s apparent violations of sanctions against Iran.
Kraken, which voluntarily disclosed the violations, has agreed to pay $362,000 and will invest another $100,000 in compliance controls, according to OFAC.
The settlement marks the fourth time OFAC has settled with a crypto firm, following agreements with BitGo, Inc., BitPay, Inc., and Bittrex, Inc. OFAC is a sanctions office within the U.S. Treasury Department.
For several years, Kraken processed $1.7 million in transactions for users who appeared to be located in Iran. The 826 transactions occurred between October 2015 and June 2019. U.S. companies are banned from doing business in Iran.
Although Kraken had anti-money laundering and sanctions compliance programs in place, the crypto firm did not implement appropriate geolocation tools, including a system to block internet protocol addresses, OFAC said. Kraken had allowed users who appeared to be in Iran to make digital currency transactions on its platform.
“This case highlights the importance of using geolocation tools, including IP blocking and other location verification tools, to identify and prevent users located in sanctioned jurisdictions from engaging in prohibited virtual currency-related transactions,” OFAC said in the settlement announcement. “Limiting the use of such controls only to the time of account opening — and not throughout the lifetime of the account or with respect to subsequent transactions — could present sanctions risks to virtual currency-related companies."
After it discovered the problem, Kraken set up an automated system to block IP addresses linked to sanctioned jurisdictions and began using blockchain analytics tools for sanctions monitoring. The firm also hired a dedicated head of sanctions to direct its compliance efforts.
The settlement amount "reflects OFAC’s determination that Kraken’s apparent violations were non-egregious and voluntarily self-disclosed," the agency said. The agreement comes two months after Kraken CEO Jesse Powell stepped down from his role.
Kraken may not be the last crypto firm to face scrutiny for its business dealings in sanctioned countries. Binance reportedly continued to operate in Iran after 2018 despite U.S. sanctions, although the company maintains it is “fully compliant” with international sanctions.
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