US OFAC Fines BitPay For Transactions with Sanctioned Countries

Crypto payment provider, BitPay has agreed to pay $507,375 to settle violations of sanctions rules administered by the US Treasury’s Office of Foreign Assets Control.

The OFAC said the violations occurred because BitPay, in 2,102 instances, allowed people located in sanctioned regions to transact with merchants in the United States and elsewhere using cryptocurrencies on its platform. The company was aware that based on the IP address data it collects, users from Ukraine, Cuba, Iran, Sudan and Syria logged into BitPay platform.

While BitPay screened its direct customers and conducted due diligence to ensure they were not located in sanctioned jurisdictions, the company failed to screen location data that it obtained about its merchants’ buyers.

Between June 2013 and September  2018, BitPay had deficiencies in the sanctions screening process which led to transactions worth $129,000 with persons in sanctioned territories. The firm’s systems failed to analyze all data required for compliance with OFAC sanctions and therefore did not implement controls to prevent such users from accessing its service.

In addition, the company failed to inform OFAC about these transactions and did not voluntarily self-disclose violations of US sanctions.

“The Apparent Violations related to BitPay’s payment processing service, which enables merchants to accept digital currency as payment for goods and services. Specifically, BitPay received digital currency payments on behalf of its merchant customers from those merchants’ buyers who were located in sanctioned jurisdictions, converted the digital currency to fiat currency, and then relayed that currency to its merchants,” the OFAC said.

A Message to All Crypto Firms

The $500k fine is quite mild by OFAC standards, which said it could have fined BitPay more than $600 million for the improper transactions. The mitigated penalty reflects the agency’s determination that BitPay is a ‘relatively small company’, and also the remedial measures the company implemented when it discovered the apparent violations.

The watchdog has also credited BitPay for launching a new customer identification tool that is mandatory for merchants’ buyers who wish to pay invoices above $3,000.

Nevertheless, the settlement sends an important message to crypto businesses. The OFAC itself reiterated that digital asset institutions should take a risk-based approach to sanctions compliance to detect flaws in internal controls.

BitPay facilitates the acceptance of cryptocurrencies by monitoring, validating, and confirming client transactions on each blockchain. On the merchant side, Bitpay allows clients to settle in Bitcoin, Ethereum, and Bitcoin Cash and has also options to settle in multiple stablecoins, including Circle USDC and Gemini Dollar.

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