Kraken Agrees to Pay $362K Fine for Onboarding Users from Iran

Cryptocurrency exchange Kraken has reached a settlement with the US Treasury Department's Office of Foreign Assets Control (OFAC) for a violation of sanctions on Iran, agreeing to pay a penalty of $362,159.

Announced on Monday, the penalty on the crypto exchange will settle a potential civil liability for apparent violations of sanctions against Iran. Moreover, the exchange agreed to invest an extra $100,000 for implementing further sanctions compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term controls.

Crypto Can't Escape Sanctions Rule

Earlier, a media report revealed that Kraken was facing a federal investigation in the United States for suspected violation of the country's sanctions rule. The OFAC confirmed that the cryptocurrency exchange Cryptocurrency Exchange A cryptocurrency exchange is an online platform that supports the exchange of various currencies for a cryptocurrency or digital asset.Comparable to a generalized financial exchange, a crypto exchange’s core function is to permit and encourage the buying and selling of cryptos.This is accomplished by producing a stable trading environment suitable for traders nested through different locations around the world. Sometimes a crypto exchange may be referred to as a digital currency exchange (DCE) f A cryptocurrency exchange is an online platform that supports the exchange of various currencies for a cryptocurrency or digital asset.Comparable to a generalized financial exchange, a crypto exchange’s core function is to permit and encourage the buying and selling of cryptos.This is accomplished by producing a stable trading environment suitable for traders nested through different locations around the world. Sometimes a crypto exchange may be referred to as a digital currency exchange (DCE) f Read this Term failed to timely implement appropriate geolocation tools that include an automated internet protocol (IP) address blocking system.

This lapse allowed users from Iran, a sanctioned country, to make cryptocurrency transactions on Kraken.

According to the OFAC, the crypto exchange processed 826 transactions for users located in Iran from around October 2015 to June 2019. Though Kraken had controls to prevent users from sanctioned jurisdictions from onboarding its platform, it did not implement an IP address-blocking mechanism based on geolocation.

Further, a leaked spreadsheet shared by Kraken's former CEO, Jesse Powell, on the company-wide Slack channel showed earlier this year that the exchange has 1,522 users residing in Iran, 149 in Syria, and 83 in Cuba, alongside 2.5 million US users. Powell said the list was prepared based on the resident information of 'verified accounts'.

"Kraken is pleased to have resolved this matter, which we discovered, voluntarily self-reported and swiftly corrected," Kraken's Chief Legal Officer, Marco Santori, said in a statement shared with media houses. "Even before entering into this resolution, Kraken had taken a series of steps to bolster our compliance measures. This includes further strengthening control systems, expanding our compliance team, and enhancing training and accountability."

Meanwhile, Kraken is not the only cryptocurrency exchange to face a penalty for sanctions violation. Last month, a crypto platform, Bittrex Inc agreed to pay $29 million in fines for violating sanctions rules on certain countries and anti-money laundering laws. Both OFAC and Financial Crimes Enforcement Network (FinCEN) took action against the exchange.