Crypto exchange Bittrex has agreed to pay $29mn to settle enforcement cases with US authorities for “apparent violations” of sanctions against against a host of countries, including Iran, Cuba and Syria.
The US Treasury said on Tuesday the case against the Washington-based company marked the first parallel enforcement actions by Office of Foreign Assets Control (Ofac) and the Financial Crimes Enforcement Network (FinCEN) in the crypto industry.
The settlements extend the crackdown by financial crime watchdogs against alleged sanctions evasion taking place in the crypto sphere.
Earlier this year, the US also sanctioned two crypto mixing services, Blender.io and Tornado Cash, both of which were allegedly used by North Korea-backed hackers. Ofac’s action against Bittrex represents the office’s largest enforcement action relating to virtual currencies.
“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 US national security”, Ofac director Andrea Gacki said.
Bittrex agreed to remit over $24mn to Ofac in order to settle potential civil liability for over 116,000 apparent violations of multiple sanctions programs. The exchange’s sanctions compliance shortcomings, the Treasury said, meant Bittrex failed to prevent persons apparently located in the Crimea region of Ukraine, Cuba, Iran, Sudan, and Syria from using the platform.
These persons allegedly engaged in $263mn worth of virtual currency related transactions between March 2014 and December 2017. The Treasury said Bittrex had reason to know the whereabouts of these individuals based on IP address information and physical address information collected at the customer onboarding stage.
Ofac also determined the exchange “conveyed economic benefit to thousands of persons in several jurisdictions subject to Ofac sanctions and thereby harmed the integrity of multiple Ofac sanctions programs”.
“Virtual currency exchanges operating worldwide should understand both who — and where — their customers are,” Gacki added.
The exchange also agreed to settle with FinCEN for more than $29mn for “willful violations” of the Bank Secrecy Act’s anti-money laundering programme and suspicious activity reporting requirements. However, FinCEN credited Bittrex’s $24mn payment to Ofac as part of its own settlement.
During the period from February 2014 to December 2018, FinCEN’s investigation concluded Bittrex “failed to maintain an effective anti-money laundering programme”. The exchange did not file any suspicious activity report between February 2014 and May 2017 and failed to file reports on a “significant number” of transactions that involved sanctioned jurisdictions.
“For years, Bittrex’s anti-money laundering and suspicious activity reporting failures unnecessarily exposed the US financial system to threat actors,” said FinCEN acting director Himamauli Das, adding the company’s failures created exposure to “high-risk counterparties including sanctioned jurisdictions, darknet markets, and ransomware attackers”.
Bittrex said the company has “strived to comply with all government requirements diligently and in good faith,” adding “we are proud of our steadfast commitment to robust compliance, and the strong compliance measures that we have in place today”.
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