Crypto company fined $29.3 million for violating several US sanctions

The Treasury Department fined a Washington-based cryptocurrency trading platform $29.3 million for violating several sanctions, including those that prohibit U.S. companies from doing business with individuals operating in Iran, Sudan, Syria, Cuba and the Crimea region of Ukraine, it announced agency on Tuesday.

Bittrex, an online currency exchange and cryptocurrency wallet company based in Bellevue, Washington, agreed to pay $24.3 million to the Treasury’s Office of Foreign Assets Control to settle civil charges that it executed 116,421 transactions worth more than 260 million dollars that violated US sanctions. Treasury’s Financial Crimes Enforcement Network division, or FinCen, imposed a total civil penalty of $29.3 million, covering additional violations under the Bank Secrecy Act.

FinCen said it will credit the OFAC fine to settle Bittrex’s potential liability with the agency. The company will pay 5 million dollars to the treasury.

Bittrex’s reporting failure “unnecessarily exposed the US financial system to threat actors,” said FinCen’s acting director Himamauli Das.

“Bittrex’s failures created exposure to high-risk counterparties including sanctioned jurisdictions, darknet markets, and ransom attackers. FinCEN has made clear that virtual asset service providers must implement robust risk-based compliance programs and meet their BSA reporting requirements, and will not hesitate to act when it identifies willful violations of the BSA,” Das said.

The settlement is OFAC’s largest enforcement action against a cryptocurrency company to date and is the first joint enforcement action by OFAC and FinCen.

Bittrex allegedly failed to prevent people in restricted areas from using their services. The company operated 1,730 accounts that processed 116,421 online virtual currency-related transactions totaling more than $263 million between March 28, 2014 and December 31, 2017, according to a press release.

FinCen also discovered that the company did not maintain an effective anti-money laundering program from February 2014 to December 2018. At times, as few as two employees were responsible for reviewing over 20,000 daily transactions for suspicious activity.

Bittrex also failed to submit any suspicious activity reports between February 2014 and May 2017, including processing 22 transactions from the sanctioned sites involving virtual assets worth over $1 million. More than 200 transactions during that time involved $140,000 worth of virtual assets, which is nearly 100 times larger than the average transaction on the company’s platform, according to the agencies.

The actions violated OFAC’s policies, which generally prohibit individuals and companies located in the United States from interacting with individuals and companies in sanctioned jurisdictions.

The violations were discovered months after the Biden administration established a task force to enforce US and allied sanctions against Russian officials and oligarchs who helped finance Russian President Vladimir Putin’s invasion of Ukraine.

FinCen said Bittrex’s policies show it was aware of OFAC’s sanctions regulations as far back as August 2015, but did not begin checking customers for their locations until October 2017. A sanctions compliance program was not adopted until December 2015, although Bittrex began offering virtual currency services in early 2014.

Bittrex began implementing measures to fix improper monitoring practices only after OFAC subpoenaed the company in October 2017.

In a statement, Bittrex said none of the allegations relate to conduct beyond 2018.

“As the settlement documents and announcements confirm, we had controls in place from an early stage – including formal sanctions and anti-money laundering policies – and we engaged third-party experts and service providers to review our compliance processes, conduct sanctions screening, and help verify accounts,” a spokesperson told CNBC. “As a growing company, we routinely reviewed and improved these features during the relevant period.”