While Kraken has been the subject of proven breaches of US sanctions against Iran, the platform has paid a fine of more than $360,000 to OFAC. His cooperation with the regulators allowed him to avoid a much heavier sanction.
Kraken reaches agreement with OFAC
This summer, we learned that the Kraken exchange was in account with theOffice of Foreign Assets Control (OFAC) regarding violations of US sanctions against Iran. This case seems to have since been settled, because the two parties have agreed on a fine of $362,158.70. In addition, Kraken has committed to investing an additional $100,000 in sanctions compliance monitoring.
While the fine may seem light, it must be related to the total volume of the dispute. This groups together exactly 826 fraudulent transactions for a volume of $1,680,577.10.
On its platform, Kraken announces spot trading fees of 0 to 0.27%. If we extrapolate to get an idea, we can estimate that the exchange could have achieved a turnover of less than 4,400 dollars at most on the volume concerned. This estimate, although inaccurate, puts the amount of the fine into perspective.
The flaw comes from the fact that until now, Kraken controlled the geolocation at registration, but not during common use of its platform. This means that Iranian residents have been able to use the exchange’s services after registering from a non-sanctions region, either physically or through a VPN:
“According to IP address data, account holders who established their account outside sanctioned jurisdictions appear to have accessed their account and transacted on Kraken’s platform from within a sanctioned jurisdiction. »
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A fine that could have been more substantial
According to the document provided by OFAC, Kraken might have had to bear a much heavier penalty. Indeed, if it was a matter of flagrante delicto, the maximum fine provided for by law is more than 272 million dollars for the present case. But in reality, Kraken reported these irregularities to OFAC on his own.
In such cases, the penalty in force is then half the value of each transaction, or just over $840,000 in this case. But Kraken has several mitigating factors in its favor.
First, the exchange voluntarily disclosed the sanctions violation to OFAC and importantly, there were no precedents for the five years prior to the first transaction at issue.
Furthermore, Kraken has taken steps to prevent this from happening againsuch as more extensive geolocation controls, as well as the hiring of a dedicated sanctions compliance program manager.
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Sources: OFAC, Kraken Fees
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I timidly discovered the world of blockchain at the end of 2018 during my quest for financial freedom. Initially invested moderately, it was only two years later that I took the gamble of betting everything on the movement that was taking shape then. I then dedicate 2021 to training myself better to acquire more knowledge and seriousness. As I often like to say: I still have a billion things to learn. And what I do know, I want to share with you.
Vincent Mayor
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