In October, the Treasury Department warned that cryptocurrencies “potentially reduce the efficacy of American sanctions.” It released a 30-page compliance manual that recommended cryptocurrency companies use geolocation tools to weed out customers in restricted regions.
“The fact that crypto can move without a bank or intermediary means that exchanges are responsible for certain types of financial regulatory compliance,” said Hailey Lennon, a lawyer at Anderson Kill who handles regulatory issues in crypto.
Kraken and the issue of sanctions surfaced in a November 2019 lawsuit by a former employee from the finance department, Nathan Peter Runyon, who accused the start-up of generating revenue from accounts in countries that were under sanctions. He said he had taken the matter to Kraken’s chief financial officer and top compliance official in early 2019, according to legal filings. (The suit was settled last year.)
That same year, O.F.A.C. began investigating Kraken, focusing on the company’s accounts in Iran, the people familiar with the investigation said. Kraken’s customers have also opened accounts in Syria and Cuba, two other countries under U.S. sanctions, the people said.
In 2020, O.F.A.C. fined BitGo, a digital wallet service with an office in Palo Alto, Calif., more than $98,000 in 2020 for 183 apparent sanctions violations. Last year, it fined BitPay, an Atlanta-based crypto payment processor, more than $500,000 for 2,102 apparent violations. Coinbase also disclosed in a 2021 financial filing that it had sent notices to O.F.A.C. flagging transactions that may have violated sanctions, though the agency hasn’t taken any enforcement action.
Mr. Powell co-founded Kraken in 2011 and was an early proponent of Bitcoin, a digital currency that was marketed as being free of any government’s influence or regulation.
Article source: https://www.nytimes.com/2022/07/26/technology/kraken-crypto-iran.html
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