The Treasury Department’s Office of Foreign Assets Control reports that a U.S. company has agreed to remit $7.59 million to settle its potential civil liability for 65,942 apparent violations of multiple sanctions programs.
OFAC states that this and other recent enforcement actions involving online digital asset companies emphasize the importance for new companies and those involved in emerging technologies to incorporate sanctions compliance into their business functions at the outset, especially when they seek to offer financial services to a global customer base. This case also highlights the importance of using all available location-related information for sanctions compliance purposes and integrating such information into a risk-based sanctions compliance program to mitigate the risk of providing services to persons in sanctioned jurisdictions.
For more information on making sure your company complies with U.S. sanctions, please contact attorney Kristine Pirnia via email.
According to an OFAC press release, in this case the company offered an online digital assets trading and settlement platform that allowed customers to fund their accounts and conduct trading activity. However, the company did not implement a sanctions compliance program until 16 months after it began operations. While that program provided for a review of “Know Your Customer” information for new customers in jurisdictions subject to comprehensive OFAC sanctions, existing customers were not retroactively screened in this manner.
As a result, customers that had self-identified as residing in a sanctioned jurisdiction before the program was implemented were generally able to continue using the company’s platform. In addition, while the company made efforts to identify and restrict accounts with a nexus to Iran, Cuba, Sudan, Crimea, and Syria pursuant to its compliance program, some customers apparently located in these jurisdictions continued to use the company’s platform.
OFAC states that the statutory maximum civil monetary penalty in this matter is $19.7 billion and the base penalty amount is $99.2 million. Aggravating factors include the company’s failure to exercise due caution or care for its sanctions compliance obligations when it operated with no sanctions compliance program for more than a year, its failure to apply the compliance program it did eventually implement consistently across sanctioned jurisdictions and pre-existing accounts, and the fact that it had reason to know that the users involved in the apparent violations were located in sanctioned jurisdictions based on their physical address data and IP address data. Mitigating factors included the company’s clean penalty history, its status as a small start-up at the time of most of the apparent violations, the additional compliance measures taken after the company was acquired by another firm, and the fact that many of the transactions at issue were for a relatively small amount.
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