Nov 28, 2022 - Economy

Kraken settles $1 million in apparent sanctions violations for $360,000

Illustration of a tentacle holding a bunch of cash.

Illustration: Aïda Amer/Axios

Kraken, a U.S.-based cryptocurrency exchange, has agreed to pay $362,159 in a settlement over apparent violations of the U.S. Treasury Department's sanctions program.

Driving the news: "Kraken processed 826 transactions, totaling approximately $1,680,577.10, on behalf of individuals who appeared to have been located in Iran at the time," Treasury said in a statement.

Context: Iran has been under sanctions of various kinds by the United States since 1979.

  • Specifically, 32 CFR 560.204 forbids transactions of various kinds with Iran.

Details: The U.S. Treasury Department's Office of Foreign Asset Control (OFAC) found fault in Kraken's failure to check the whereabouts of users. The company vetted the location of people when signing up, but didn't check on their locations later, when they were signing in from within sanctioned nations.

  • That said, OFAC also noted that Kraken had been proactive about correcting the shortcomings, first through self-reporting the violations.
  • It has also added significant compliance measures, such as new analysis tools and additional staff training.
  • As part of the settlement, the company agreed to invest an additional $100,000 in certain sanctions compliance controls.

What they're saying: "The settlement amount reflects OFAC’s determination that Kraken’s apparent violations were non-egregious and voluntarily self-disclosed," Treasury's statement says.

The other side: “Kraken is pleased to have resolved this matter, which we discovered, voluntarily self-reported and swiftly corrected," Marco Santori, the firm's chief legal officer, said in a statement via a spokesperson.

The big picture: Treasury has been focusing more on cryptocurrency this year. Earlier this year, it sanctioned the decentralized privacy application, Tornado Cash.

Quick take: It's surprising that the fine is less even than the amount of trades with Iran. For scale, Kraken has seen over a billion dollars in trade volume just over the last 24 hours, according to CoinGecko.

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