The U.S. Treasury’s Office of Foreign Assets Control (OFAC) recently announced a settlement with CoinList, a cryptocurrency exchange, for an “apparent violation” of its sanctions related to Russia and Ukraine. The violation involved the processing of 989 transactions worth $1.25 million from users who resided in Crimea, a disputed region of Ukraine that was annexed by Russia in 2014, leading to U.S. and international sanctions.
During the two-year period ending in May 2022, CoinList had compliance procedures in place, but its screening procedures failed to recognize users who identified themselves as members of a non-embargoed country but provided a different address. Some users selected Russia as their country of residence but provided an address in Crimea. This oversight resulted in OFAC considering it a violation of the sanctions.
Despite the violation, OFAC listed several mitigating factors that contributed to the settlement. Firstly, CoinList had not received any notice from OFAC in the five years preceding the first violating transaction. Additionally, the amount involved in the violations represented a minimal percentage of all transactions processed by CoinList. Furthermore, CoinList cooperated with OFAC’s investigations and took remedial measures to address the issue.
The settlement reached between OFAC and CoinList amounts to approximately $1.2 million, which is $44,450 less than the total value of the violating transactions. However, OFAC will suspend $300,000 of the settlement amount after CoinList fulfills its compliance commitments. This remaining amount will be invested by CoinList in additional sanctions compliance controls as part of the settlement agreement.
A Fraction of Maximum Civil Monetary Penalty
It is worth noting that the settlement imposed on CoinList represents only a fraction of the maximum civil monetary penalty that could have been imposed. The maximum penalty prescribed by OFAC guidelines is $327 million, while the settlement amount is significantly less. This discrepancy indicates that OFAC considered the actions of CoinList to be non-egregious and non-voluntarily self-disclosed.
CoinList’s Limited Impact on the Market
CoinList, a relatively minor exchange in the cryptocurrency industry, only processed $350,000 in volume over the past 24 hours, according to data from CoinGecko. This low trading volume highlights the limited impact CoinList has on the market compared to larger and more prominent exchanges.
The settlement between OFAC and CoinList serves as a reminder of the importance of compliance procedures and the risks involved in handling transactions from regions subject to sanctions. While CoinList did have compliance measures in place, its screening procedures were insufficient in recognizing users who provided conflicting information. Although the settlement amount is significantly less than the total value of the violating transactions, it reinforces the necessity for all cryptocurrency exchanges to properly implement and enforce sanctions compliance controls.