The U.S. Treasury’s Office of Foreign Assets Control (OFAC) recently reached a settlement with cryptocurrency exchange CoinList on December 13th. The settlement arose from CoinList’s processing of 989 transactions amounting to $1.25 million made by individuals residing in Crimea over a two-year period ending in May 2022. The agency deemed this a violation of its sanctions concerning Russia and Ukraine.
CoinList, while having compliance procedures in place during the mentioned period, did not adequately identify users who declared themselves as residents of a non-sanctioned country but provided an address in Crimea. Some users indicated Russia as their country of residence but supplied an address in Crimea, a disputed region annexed by Russia in 2014, resulting in both U.S. and international sanctions. This failure in screening procedures allowed these transactions to slip through undetected.
OFAC listed several factors that contributed to the settlement agreement. First, CoinList had not received any notice from OFAC regarding sanctions violations in the five years leading up to the initial offense. Additionally, CoinList cooperated fully with investigations, the monetary value of the violations represented a small portion of the overall transactions, and the exchange took remedial measures to address the issue promptly.
OFAC settled with CoinList for approximately $1.2 million. Curiously, this amount is $44,450 less than the total value of the violating transactions. CoinList handled $1,252,280 but will pay a fine of $1,207,830. Furthermore, once CoinList fulfills its compliance commitments, OFAC will suspend $300,000 of the settlement amount, which CoinList will reinvest in additional sanctions compliance controls as part of the agreement. Despite the settlement, it is noteworthy that the imposed fine represents only a fraction of the maximum civil monetary penalty, which amounts to $327 million according to OFAC guidelines. The settlement also falls significantly below the recommended base civil monetary penalty of $3 million.
OFAC’s assessment of the settlement amount reflects its determination that CoinList’s actions were non-egregious and not voluntarily self-disclosed. While the violations did occur, it is crucial to highlight that CoinList is a relatively minor exchange in terms of trading volume. Over the past 24 hours, the platform has handled a mere $350,000 in volume, according to data from CoinGecko.
CoinList’s settlement with OFAC serves as a reminder of the importance of robust compliance procedures in the cryptocurrency industry. Failing to properly screen and detect sanctions-related violations can result in substantial penalties, even for smaller exchanges. Both users and platforms must be vigilant in adhering to regulatory requirements to ensure the integrity and security of the broader digital asset ecosystem.