OFAC Fines Bitcoin Service Provider for Sanctions Violations
An Atlanta-based Bitcoin service provider was fined more than $500,000 for allowing people in sanctioned countries to use its services. BitPay committed more than 2,000 sanctions violations when it allowed people in Cuba, North Korea, Iran, Sudan, Syria and the Crimea region of Ukraine to use digital currency on the company’s platform to transact with U.S. parties, the Office of Foreign Assets Control said Feb. 18. The company allowed the transactions even though it had information that revealed the people were located in sanctioned regions, OFAC said, adding that “deficiencies” in the company’s compliance program led to the violations. The agency said BitPay allowed $129,000 worth of digital currency transactions that should have been blocked.
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Although BitPay screened its “direct customers” -- or merchants -- against OFAC’s sanctions lists, the company didn’t screen location data on its merchants’ buyers, who were located in the sanctioned countries. And even when the company received the buyers’ names, addresses, emails and phone numbers, OFAC said, BitPay’s transaction review process “failed to analyze fully this identification and location data.”
The case constituted a non-egregious case, OFAC said, but BitPay didn’t voluntarily disclose the violations. Mitigating factors included that BitPay made efforts to implement compliance controls as early as 2013 and that it “made clear” in employee training that it doesn't allow merchant sign-ups from sanctioned countries. OFAC also said BitPay is a “small business,” hadn't received a penalty notice in the previous five years, cooperated with OFAC’s investigation and improved its compliance procedures.
Aggravating factors included BitPay’s failure to “exercise due caution or care for its sanctions compliance obligations” and that its violations led to more than $128,000 in “economic benefit” to people in sanctioned countries.
OFAC said the case highlights the compliance risks faced by digital currency services. Those companies “are responsible for ensuring that they do not engage in unauthorized transactions,” OFAC said, adding that they should develop a tailored compliance program that screens “all available information,” including IP addresses and location data.