Kraken to pay a $362,000 fine for allowing Iranian users to join

US cryptocurrency exchange, Kraken, made a mistake of not implementing an automated IP blocking tool in time. As a result, the exchange had a number of users from Iran. And, since there are sanctions imposed on Iran, the platform got in legal trouble with the US Treasury Department’s Office of Foreign Assets Control (OFAC). Now, the two managed to reach a settlement for the violation of sanctions, which resulted in Kraken having to pay a fine of $362,159.

Kraken agrees to pay over $362k in penalties

The penalty was announced yesterday, November 28th, and it will finally settle a potential civil liability for the violation of sanctions. Furthermore, Kraken also agreed to implement additional sanctions compliance controls, which will require another $100,000.

According to media reports, Kraken became a target of a federal investigation in the US due to suspicions that the exchange violated the country’s sanctions rule. After a brief investigation, it was quickly established that the exchange did not implement appropriate geolocation tools. As a result of this, it could not ban Iranian IP addresses, which allowed users from the sanctioned country to make crypto transactions on Kraken, thus technically avoiding the sanctions with the help of the company.

The OFAC said that the exchange processed a total of 826 transactions for Iran’s users between October 2015 and June 2019. It should be noted that Kraken had measures in place to prevent users from sanctioned jurisdictions from joining its platform. However, an IP address blocker was not among them during the 4-year period in question.

Kraken is pleased that the matter was resolved

Another noteworthy detail is the fact that Jesse Powell, the company’s former CEO, leaked a spreadsheet regarding the company-wide Slack channel. The leak revealed that earlier this year, Kraken had 1,522 users who reside in Iran. Not only that, but there are users from other sanctioned jurisdictions as well, including 149 of them from Syria, and 83 from Cuba. These users traded crypto alongside 2.5 million United States-based users. Powell stated that the list was made using information from verified accounts.

Following the resolution of the matter, Marco Santori, the exchange’s acting Chief Legal Officer, said that the exchange is pleased that the issue was solved. He noted that the exchange discovered and reported the matter itself, which was followed by a swift correction. He stressed that Kraken has taken steps to improve its compliance measures even before the issue was resolved with the Treasury.

As for the steps that the exchange has taken, they include strengthening the control systems, expanding the compliance team, and increasing training and accountability. The bigger issue is that Kraken is not the only exchange that violated the sanctions. Bittrex found itself in a similar situation, and it agreed to pay $29 million in fines for violating sanctions on certain countries, as well as AML laws.