The Department of the Treasury’s Office of Foreign Assets Control (OFAC) on Feb. 18 announced a settlement with digital currency payment service provider BitPay for lapses in its sanctions compliance procedures that led to 2,102 apparent violations of multiple sanctions programs.
BitPay agreed to pay $507,375 to settle its liability after allegedly allowing individuals who appear to have been based in the sanctioned regions of Crimea (Ukraine), Cuba, North Korea, Iran, Sudan, and Syria to transact with merchants in the United States using its platform.
The details: BitPay’s alleged sanctions lapses occurred between June 2013 and September 2018, according to OFAC. The platform processed the more than 2,000 transactions on behalf of individuals apparently located in the sanctioned regions worth approximately $129,000 in digital currency despite having access to IP information and other data, such as buyers’ names, addresses, email addresses, and phone numbers.
“While BitPay screened its direct customers—the merchants— against OFAC’s List of Specially Designated Nationals and Blocked Persons … and conducted due diligence on them to ensure they were not located in sanctioned jurisdictions, BitPay failed to screen location data that it obtained about its merchants’ buyers,” OFAC stated in its web notice.
Remedial measures: Though BitPay did not voluntarily self-disclose the apparent violations, the company cooperated with OFAC’s investigation. BitPay had a formalized sanctions compliance program in 2014 that it has since updated to minimize the risk of future violations, namely by blocking IP addresses that appear to originate in sanctioned regions and improving its review processes of customer data.
OFAC deemed BitPay’s alleged violations to be “non-egregious.” The base civil penalty applicable in the case was approximately $2.26 million.
Compliance takeaway: “Companies that facilitate or engage in online commerce or process transactions using digital currency are responsible for ensuring that they do not engage in unauthorized transactions prohibited by OFAC sanctions, such as dealings with blocked persons or property, or engaging in prohibited trade or investment-related transactions,” OFAC stated.
OFAC hit fellow digital asset platform BitGo with a $99,000 fine for similar apparent violations in December.