OFAC Settles With BitGo For Apparent Multiple Sanctions Violations

The Office of Foreign Assets Control (OFAC), under the U.S. Treasury Department, entered into a $98,830 settlement with U.S.-based digital asset financial services firm BitGo, Inc. to resolve its potential civil liability for 183 apparent violations of multiple sanctions programs involving digital currency transactions.

The financial intelligence and enforcement agency administers and enforces economic and trade sanctions in support of U.S. national security and foreign policy objectives. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions.

BitGo is charged of failing to prevent persons apparently located in sanctioned areas such as the Crimea region of Ukraine, Cuba, Iran, Sudan, and Syria, from using its non-custodial secure digital wallet management service.

BitGo processed 183 digital currency transactions, totaling $9,127.79, between approximately March 2015 and December 2019 on behalf of individuals who, based on their IP addresses, were located in sanctioned jurisdictions.

During the period, individuals located in Crimea, Cuba, Iran, Sudan, and Syria signed up for “hot wallet” accounts and accessed BitGo’s online platform to conduct digital currency transactions.

BitGo apparently violated Executive Order 13685 of December 19, 2014 by failing to prevent users located in these sanctioned areas to access and use its services to engage in digital currency transactions.

The OFAC claims that BitGo had reason to know that these users were located in sanctioned jurisdictions based on Internet Protocol (IP) address data associated with devices used to log in to the BitGo platform, which it had separately obtained for security purposes.

However, BitGo failed to implement controls designed to prevent such users from accessing its services. The OFAC determined that BitGo did not voluntarily self-disclose the apparent violations and that the apparent violations constitute a non-egregious case.

The agency noted that this action emphasizes that OFAC sanctions compliance obligations apply to all U.S. persons, including those involved in providing digital currency services.

However, after learning of the apparent violations in January 2020, BitGo implemented an OFAC Sanctions Compliance Policy and undertook significant remedial measures.

The statutory maximum civil monetary penalty applicable in this matter is $53.05 million. However, BitGo got away with a small penalty as it is a relatively small company and has not received a penalty notice or Finding of Violation from OFAC in the past five years preceding these apparent violations. BitGo also cooperated with OFAC’s investigation and already invested in significant remedial measures.

BitGo, backed by Michael Novogratz’s Galaxy Digital Ventures and Goldman Sachs, is a provider of institutional cryptocurrency financial services, providing clients with security, compliance, and custodial solutions. It also processes on-chain Bitcoin transactions, supporting over 250 coins and tokens.

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