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Kraken Bows Down Before US Treasury, Agreed To Remit $360k

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Kraken, the world’s second-largest crypto exchange by market cap has reached a settlement deal with the U.S. Treasury Department’s Office of Foreign Assets Control [OFAC] over allegations of serving customers in Iran, as per the statement released by OFAC.

The U.S. Department of the Treasury’s Office of Foreign Assets Control [OFAC] today announced a settlement with Payward, Inc. d/b/a Kraken (“Kraken”), a Delaware-incorporated virtual currency exchange with operations in the United States and elsewhere.  

As part of the settlement with the OFAC, Kraken agreed to pay a fine of $362,158.70 and also consented to invest an additional $100k in certain sanctions compliance controls.  

The press release cited Kraken’s failure to implement relevant geolocation tools, including an automated internet protocol [IP] address blocking system, in a timely manner.

OFAC claimed that the US-based trading platform exported services to customers who looked to be in Iran and used Kraken’s platform to transact in digital currency.

Further details revealed that the firm allegedly processed over 820 transactions that came to be around $1.68 million on behalf of customers who may have been located in Iran.

The potential breaches, according to the Department of the Treasury, were “non-egregious and willingly self-disclosed” between October 14, 2015, and June 29, 2019.

OFAC argued despite Kraken having a sanctions compliance policy in place to prevent users from signing up in restricted countries, the platform “failed not to impose IP address blocking” on activity across its platform at the time of the alleged violation.

Kraken Failed To Implement “IP address blocking”

This failure on the part of Kraken emboldened some users to register from locations that were not subjected to US sanctions and then proceed to conduct transactions from sanctioned locations, like Iran, according to IP address data obtained by the Treasury Department.

Marco Santori, the platform’s chief legal officer told in an interview that the firm has since made a number of changes, including adding geolocation blocking to stop users from accessing the site in prohibited locations and hiring a specific head of sanctions.

Additionally, the business has spent money on staff training on sanctions compliance and has put in place “blockchain analysis tools to assist with sanctions monitoring.”

The leading exchange was among other major industry players like Coinbase, Binance, Gate.io, etc to publish proof-of-reserves, including liabilities, as part of their audits.

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