The Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) of the U.S. Treasury department announced on October 11 that charges against the cryptocurrency exchange Bittrex had been resolved. Between March 2014 and December 2017, the cryptocurrency exchange was charged with breaking sanctions and failing to “implement effective sanctions compliance controls.”
FinCEN and OFAC have filed charges against Bittrex, a cryptocurrency asset exchange based in Washington State, for “116,421 apparent violations of multiple sanctions programs.” The violations were caused by transactions from “persons apparently located in the Crimea region of Ukraine, Cuba, Iran, Sudan, and Syria,” according to the U.S. Treasury department regulators. According to American officials, the total amount of cryptocurrency transactions that violated American financial sanctions totaled $263.45 million.
The transactions can endanger the country as a whole if virtual asset service providers (VASPs) do not use strong sanctions compliance, according to Andrea Gacki, director of OFAC. “When virtual currency firms fail to implement effective sanctions compliance controls, including screening customers located in sanctioned jurisdictions, they can become a vehicle for illicit actors that threaten U.S. national security,” Gacki remarked on Tuesday.
FinCEN recently, in March of last year, raised concerns about potential use of crypto assets for sanction evasion. The year before, FinCEN allegedly assessed $100 million in fines against the cryptocurrency derivatives exchange Bitmex for “willful violations of the Bank Secrecy Act.” Over the past few years, the U.S. Treasury Department’s OFAC has been active in sanctioning crypto assets. Most recently, the regulator banned the ether mixing program Tornado Cash.
According to a New York Times (NYT) article from July 2022 that cited five people with knowledge of the situation, OFAC was allegedly looking into the San Francisco-based cryptocurrency exchange Kraken. Bitpay settled with the Treasury according to an OFAC notice on February 18, 2022, and the crypto payment processor agreed to “remit $507,375 to settle its potential civil liability.”
Bittrex has agreed to pay settlements with OFAC and FinCEN for the accusations and potential liability brought against the VASP for the transactions dating from 2014 to 2017. A portion of the funds will be credited by FinCEN as per the settlement agreement.
“Bittrex has agreed to pay $29,280,829.20 as compensation for its blatant disregard for the SAR and AML requirements of the BSA. As part of Bittrex’s agreement to settle its potential liability with OFAC, FinCEN will credit the payment of $24,280,829.20, according to the regulator’s notice.
According to FinCEN, Bittrex’s AML program failed to identify risks between 2014 and 2017 and the company did not submit any suspicious activity reports (SARs) during that three-year period. In addition, according to FinCEN’s announcement, “Bittrex failed to file SARs on a sizable number of transactions involving sanctioned jurisdictions, including transactions that were suspicious in addition to involving a sanctioned jurisdiction.”