Crypto exchange Kraken received over $360 000 in fines from OFAC for violating Iran sanctions. The exchange is taking steps to ensure complete compliance with set sanctions.
As per a report released on November 28 by the US Department of Treasury, Kraken agreed to settle a sum of $362 158.70 for ignoring Iran sanctions. Furthermore, the exchange was subjected to a $100 000 investment for other sanction compliance controls. Kraken violated the rules set by the Office of Foreign Asset Exchange (OFAC) under Iranian Transactions and Violations.
The crypto company allowed over 820 Iranian citizens to conduct crypto transactions surpassing $1.6 million between 2015 and 2019. Since Kraken willfully disclosed the information, the OFAC decided on a reduced penalty. According to OFAC, the crypto exchange applied the regulations during onboarding but threw under the rug the same during transactions.
Their knowledge of the users’ IP addresses did not help the case. The said individuals from the unsanctioned region went on with transaction activity in sanction areas. These transactions led to Kraken facing 826 charges for unsanctioned transactions.
Kraken avoids further altercations
Since then, Kraken has taken necessary steps to avoid further occurrences similar to what OFAC charged them for. That included geolocation integration to block users from non-sanctioned regions, including Donetsk, Luhansk, and Crimea in Ukraine.
Furthermore, the exchange will integrate blockchain analysis tools to improve sanctions. Including a reliable vendor to help identify and verify user nationalities will provide an all-rounded approach to the said issues. The exchange is further hiring new staff for its sanction compliance program.
Generally, the aim is to ensure the exchange hosts valid and low-risk users on its platform. In so many ways, these steps will help- in protecting user privacy and funds. Additionally, it will be a much-needed deep dive into what issues such companies might face while onboarding and handling user credentials.
OFAC’s recommendations
OFAC suggests that every crypto company take a risk-based avenue as far as sanctions are concerned. The regulatory body agrees different approaches are expected since the companies vary in assets, size, services provided, customer and company location, customers and shareholders, and more.
However, looking into the management, auditing, internal controls, risk evaluation, and other factors can improve sanction compliance. The body also mentioned that from Kraken’s current situation, other crypto exchanges should adopt geolocation blocking to avoid violating set sanctions.
Through its framework released in 2019, OFAC has a detailed explanation of what it takes to create a sanction compliance program. While it primarily targets companies, users must also follow set regulations to avoid lawsuits. That knowledge also dictates the regulatory body’s actions to charge cases under sanctions compliance.
