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Digital Currency Processing Company Settles OFAC Charges for Multiple Sanctions Violations

James.Treanor@cwt.com's picture
Commentary by James Treanor

A private company offering digital currency payment processing settled its potential civil liability for alleged violations of numerous sanctions programs.

According to OFAC, the processing company allowed buyers located in the Crimea region of Ukraine, as well as Cuba, North Korea, Iran, Sudan and Syria, to make purchases from U.S. merchants using digital currency. According to OFAC, the processing company did not screen non-U.S. buyers from the various merchants, although the company had buyer name, address, email address, phone number and/or IP address information in its possession. In all, between June 10, 2013 and September 16, 2018, OFAC found that the company processed 2,102 digital currency transactions on behalf of individuals located in sanctioned jurisdictions, with a total transaction value of approximately $129,000.

OFAC stated that the company did not voluntarily self-disclose the violations, but that the violations constituted a non-egregious case. OFAC cited as a mitigating factor the company's new customer identification tool for merchants' buyers engaging in transactions involving invoices of $3,000 or more which requires an email address, a photo ID and a "selfie photo".

To settle the charges, the company agreed to pay a $507,375 civil monetary penalty.

Commentary

With this settlement, OFAC continues its recent focus on the use of digital currency-related services by users in sanctioned jurisdictions. At the end of 2020, the agency announced a settlement with a provider of digital wallet services (covered here). And in October 2020, both OFAC and FinCEN issued advisories related to risks associated with the processing of ransomware payments, including risks related to the use of digital currencies by sanctioned persons involved in ransomware attacks (covered here). OFAC is no newcomer to digital currency, however, having highlighted the attraction of such payment methods to sanctioned persons - and the resulting risk to U.S. financial institutions and other parties - as early as 2018 (covered here).

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