Crypto Exchange Kraken Settles Case of Iran Violations with US Treasury

| Updated
by Bhushan Akolkar · 3 min read
Crypto Exchange Kraken Settles Case of Iran Violations with US Treasury
Photo: Kraken Digital Asset Exchange / Facebook

As part of the settlement, the crypto exchange Kraken paid $362,000 to the US Treasury. It is also investing $100,000 for implementing additional sanctions compliance controls.

On Monday, November 28, the US Treasury Department’s Office of Foreign Assets Control (OFAC) reached a settlement with the crypto exchange Kraken for serving customers based in Iran.

To “settle its potential civil liability,” crypto exchange Kraken has agreed to pay a sum total of more than $362,000. Additionally, the US-based crypto exchange has also agreed on investing $100,000 for implementing additional sanctions compliance controls.

As per the OFAC, Kraken failed to upgrade appropriate geolocation tools as well as an automated internet protocol (IP) address-blocking system. This allowed customers from Iran to perform transactions on the Kraken platform.

Crypto exchange Kraken had reportedly processed $1.7 million in transactions for users from Iran. There were a total of 826 transactions made by Iranian users. The violations of the OFAC’s rules took place in the period between October 2015 to June 2019.

This is the fourth time that OFAC, the sanctions office of the US Treasury Department, has settled with a crypto exchange. The previous instances of the settlement have been with crypto exchanges such as BitGo Inc, BitPay Inc, and Bittrex Inc. In its settlement announcement, the OFAC noted:

“This case highlights the importance of using geolocation tools, including IP blocking and other location verification tools, to identify and prevent users located in sanctioned jurisdictions from engaging in prohibited virtual currency-related transactions. Limiting the use of such controls only to the time of account opening – and not throughout the lifetime of the account or with respect to subsequent transactions – could present sanctions risks to virtual currency-related companies.”

Kraken Gets the Act Right

After Kraken discovered the problem, the crypto exchange set up an automated system to block IP addresses linked to sanctioned jurisdictions. Besides, it has also started using blockchain analytics tools for sanctions monitoring. To improve its compliance standards, Kraken has also appointed a dedicated head of sanctions. In an email to CoinDesk, Marco Santori, chief legal officer at Kraken said:

“Kraken is pleased to have resolved this matter, which we discovered, voluntarily self-reported and swiftly corrected. Even before entering into this resolution, Kraken had taken a series of steps to bolster our compliance measures. This includes further strengthening control systems, expanding our compliance team and enhancing training and accountability.”

The agreement with OFAC comes just two months after Jesse Powell stepped down as the CEO of Kraken. Additionally, Kraken has also been working on new developments for the platform.

Earlier this month, crypto exchange Kraken announced the Beta launch of its NFT marketplace. Amid the fall of the crypto exchange FTX, Kraken has also initiated a few measures to protect creditors’ accounts.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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