U.S. virtual currency exchange agrees to settle violations of sanctions and anti-money laundering obligations

OFAC’s largest virtual currency enforcement action to date

U.S. virtual currency exchange agrees to settle violations

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) today announced that a virtual currency exchange based in Bellevue, Washington agreed to remit over $24 million and $29 million for apparent violations of multiple sanctions programs and anti-money laundering obligations.

According to today’s Treasury release, this is OFAC’s largest virtual currency enforcement action to date and also represents the first parallel enforcement actions by OFAC and FinCEN in this space. 

OFAC settlement for violations of sanctions programs

The virtual currency exchange agreed to remit over $24 million to OFAC to settle its potential civil liability for over 116,000 apparent violations of multiple sanctions programs. As a result of deficiencies related to the virtual currency exchange’s sanctions compliance procedures, the virtual currency exchange failed to prevent persons apparently located in the Crimea region of Ukraine, Cuba, Iran, Sudan, and Syria from using its platform to engage in approximately $263 million worth of virtual currency-related transactions between March 2014 and December 2017.

The applicable sanctions programs generally prohibited U.S. persons from engaging in transactions with these jurisdictions. Based on internet protocol (IP) address information and physical address information collected about each customer at onboarding, the virtual currency exchange had reason to know that these users were located in jurisdictions subject to sanctions. At the time of the transactions, however, the virtual currency exchange was not screening this customer information for terms associated with sanctioned jurisdictions.

The settlement amount reflects OFAC’s determination that the virtual currency exchange’s apparent violations were not voluntarily self-disclosed and were not egregious. 

FinCEN settlement for violations of anti-money laundering obligations

The virtual currency exchange agreed to remit over $29 million for willful violations of the Bank Secrecy Act’s anti-money laundering program and suspicious activity report reporting requirements. FinCEN will credit the payment of approximately $24 million as part of the virtual currency exchange’s agreement to settle its potential liability with OFAC.

FinCEN’s investigation found:

  • From February 2014 through December 2018, the virtual currency exchange failed to maintain an effective anti-money laundering program.
  • The anti-money laundering program failed to appropriately address the risks associated with the products and services it offered, including anonymity-enhanced cryptocurrencies.
  • The virtual currency exchange failed to file (1) any suspicious activity reports between February 2014 and May 2017, and (2) suspicious activity reports on a significant number of transactions involving sanctioned jurisdictions, including transactions that were suspicious “above and beyond the fact that they involved a sanctioned jurisdiction.”

For more information, contact a professional with KPMG’s Trade & Customs services:

Doug Zuvich
Partner and Global Practice Leader
E: dzuvich@kpmg.com

John L. McLoughlin
Principal and East Coast Leader
E: jlmcloughlin@kpmg.com

Andy Siciliano
Partner and National Practice Leader
E: asiciliano@kpmg.com

Steve Brotherton
Principal and Global Export and Sanctions Leader
E: sbrotherton@kpmg.com

Luis (Lou) Abad
Principal, Washington National Tax
E: labad@kpmg.com

Irina Vaysfeld
E: ivaysfeld@kpmg.com

Amie Ahanchian
E: aahanchian@kpmg.com

Christopher Young
E: christopheryoung@kpmg.com

Gisele Belotto
E: gbelotto@kpmg.com

George Zaharatos
E: gzaharatos@kpmg.com

Andy Doornaert
Managing Director
E: adoornaert@kpmg.com

Jessica Libby
E: jlibby@kpmg.com

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