Crypto exchange Kraken settles OFAC Iran allegations

The US Department of the Treasury’s Office of Foreign Assets Control (‘OFAC’) says it has announced a settlement with ‘Payward, Inc. d/b/a Kraken (“Kraken”), a Delaware-incorporated virtual currency exchange with operations in the United States and elsewhere,’ which has ‘agreed to remit $362,158.70 to settle its potential civil liability for apparent violations of sanctions against Iran.’ In addition, as part of its settlement, the company has agreed to ‘invest an additional $100,000 in certain sanctions compliance controls.’

OFAC explains that Kraken ‘is a centralized global virtual currency exchange that was founded in 2011 and opened for public trading in 2013’ and that users of the Kraken platform can ‘buy, sell, or hold cryptocurrencies, as well as trade fiat currency for cryptocurrencies, or exchange one cryptocurrency for another.’

The company did, OFAC says, maintain an anti-money laundering and sanctions compliance programme, which included ‘screening customers at onboarding and daily thereafter, as well as review of IP address information generated at the time of onboarding to prevent users in sanctioned jurisdictions from opening accounts.’

But, it says, despite those controls, from about 14 October 2015 to 29 June 2019, ‘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 of the transactions.’

OFAC said that although Kraken maintained controls intended to prevent users from initially opening an account while in a jurisdiction subject to sanctions, ‘at the time of the apparent violations, Kraken did not implement IP address blocking on transactional activity across its platform.’

‘According to IP address data, account holders who established their accounts outside of sanctioned jurisdictions appear to have accessed their accounts and transacted on Kraken’s platform from a sanctioned jurisdiction. As a result of the foregoing, Kraken engaged in 826 apparent violations of the Iranian Transactions and Sanctions Regulations.’

Reuters reports that in an emailed statement to the news agency, chief legal officer Marco Santori said that the company was ‘pleased to have resolved this matter, which we discovered, voluntarily self-reported and swiftly corrected.’