Crypto Exchange Kraken Settles With Treasury Department Over Iran Sanctions Violations

U.S. crypto exchange Kraken has settled with the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today, agreeing to pay $362,158.70 for apparent violations of sanctions against Iran.

“Due to Kraken’s failure to timely implement appropriate geolocation tools, including an automated internet protocol (IP) address blocking system, Kraken exported services to users who appeared to be in Iran when they engaged in virtual currency transactions on Kraken’s platform,” the agency wrote.

In July, the agency opened an investigation into Kraken for allegedly violating economic sanctions against Iran. The New York Times cited anonymous sources affiliated with the company that confirmed that the crypto exchange allowed customers in Iran and other sanctioned countries to use its platform.

“Kraken is pleased to have resolved this matter, which we discovered, voluntarily self-reported, and swiftly corrected,” Kraken’s Chief Legal Officer Marco Santori told Decrypt in a email statement.

From October 14, 2015 to June 29, 2019, the agency says that Kraken processed 826 transactions, totaling approximately $1,680,577.10, for individuals who were determined to have been in Iran at the time.

The OFAC says Kraken failed to exercise due caution or care for its sanctions compliance obligations when knowing the exchange had customers worldwide.

“[Kraken] applied its geolocation controls only at the time of onboarding and not with respect to subsequent transactional activity, despite having reason to know based on available IP address information that transactions appear to have been conducted from Iran,” the agency said.

“Kraken has robust compliance measures in place and continues to grow its compliance team to match its business growth,” Santori told Decrypt in July. “Kraken closely monitors compliance with sanctions laws and, as a general matter, reports to regulators even potential issues.”

Last year, the Commodity Futures Trading Commission ordered Kraken to pay $1.25 million in penalties for “illegally offering margined retail commodity transactions in digital assets,” including Bitcoin, and failing to register as a futures commission merchant.

As a part of the settlement, Kraken will invest an additional $100,000 in sanction compliance controls.

“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,” Santori said. “With these enhanced systems in place, we are in a stronger position to continue our mission of accelerating the adoption of cryptocurrency so people from around the world can achieve financial freedom and inclusion.”