Kraken cryptocurrency exchange settles a dispute with the US Treasury over serving Iranian clients
On November 28, the American cryptocurrency exchange Kraken reached a settlement with the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury and agreed to pay $362,158.70 for alleged violations of the sanctions against Iran.
The agency stated, "Due to Kraken's failure to timely implement appropriate geolocation tools, including an automated internet protocol (IP) address blocking system, Kraken exported services to users who appeared to be in Iran when they engaged in virtual currency transactions on Kraken's platform."
For allegedly breaking the sanctions on Iran, the agency launched an inquiry into Kraken in July. The crypto exchange allows users from Iran and other sanctioned nations to utilize its network, according to anonymous corporate sources quoted by the New York Times.
Kraken's Chief Legal Officer Marco Santori said in a statement sent through email that the company was pleased to have rectified this situation, which we identified, freely self-reported, and immediately corrected.
According to the FBI, Kraken conducted 826 transactions for customers who were found to have been in Iran at the time, totaling about $1,680,577.10, between October 14, 2015, and June 29, 2019.
The OFAC claims that despite knowing the exchange had customers all across the world, Kraken did not take reasonable precautions or care to comply with its sanctions-related requirements.
Despite having cause to believe, based on available IP address information, that transactions appear to have been undertaken from Iran, Kraken only implemented its geolocation rules at the time of onboarding and not with respect to future transactional activity, the agency stated.
In July, Santori told that Kraken has strong compliance processes in place and that the company "continues to grow its compliance team to match its business growth." Kraken closely checks compliance with sanctions laws and, generally speaking, reports even possible issues to regulators.
As a result of "illegally offering margined retail commodity transactions in digital assets," such as Bitcoin, and failing to register as a futures commission merchant, the Commodity Futures Trading Commission ordered Kraken to pay $1.25 million in fines.
Kraken will spend an additional $100,000 on procedures to ensure sanction compliance as part of the settlement.
CBW - External Analyst