MIAMI, United States. – The US Office of Foreign Assets Control (OFAC) reached an agreement with Poloniex, LLC, a Boston-based cryptocurrency exchange company, in the amount of $7,591,630 due to its potential civil liability for 65,942 apparent violations of multiple sanctions programs applied to Cuba, Sudan, Crimea and Syria, according to a document issued this Monday by the Treasury Department.
Between January 2014 and November 2019, the Poloniex trading platform allowed clients apparently located in sanctioned jurisdictions to engage in digital asset transactions online, with a combined value of $15,335,349, despite having reason to know their location according to The information of Know Your Customer (KYC) and IP address data.
According to OFAC, Poloniex failed to exercise due caution or care in its sanctions compliance obligations when it operated without a sanctions compliance program for more than a year after it began offering digital asset services globally. Although the company implemented a sanctions compliance program in May 2015, it did not apply it consistently across all sanctioned jurisdictions or legacy accounts.
Poloniex had reason to know that the users involved in the apparent violations were located in sanctioned jurisdictions, including Cuba, based on physical and IP address data for these users. However, the company provided economic benefits to 232 individuals in various jurisdictions subject to OFAC sanctions, undermining the integrity of multiple sanctions programs.
An OFAC spokesperson stated: “Poloniex failed to exercise due caution or care in its sanctions compliance obligations when it operated without a sanctions compliance program for more than a year after it began offering digital asset services globally. . Even when it did implement a sanctions compliance program, Poloniex did not apply it consistently across all sanctioned jurisdictions or pre-existing accounts.”
This case highlights the responsibility of online digital asset companies, like all financial service providers, to ensure that they do not engage in transactions prohibited by OFAC sanctions, such as providing services to individuals in sanctioned jurisdictions in a comprehensive manner. . To mitigate such risks, online digital asset companies must develop a risk-based sanctions compliance program tailored to their needs.
OFAC’s action also emphasizes the importance for startups and those involved in emerging technologies to embed sanctions compliance into their business functions early on, especially as they seek to offer financial services to a global customer base. In addition, it highlights the importance of using all available location-related information.
