Kraken to pay $300,000 fine for dealing with Iran

According to OFAC, the exchange is ready to take civil liability for violations of sanctions against Iran. The fact is that Kraken did not implement geolocation tools, including an automated IP address blocking system. As a result, customers in Iran could perform transactions on Kraken’s platform.

Representatives of the exchange agreed with the apparent violations. The platform will have to pay a fine of $362,159 and invest $100,000 in certain sanctions compliance controls.

OFAC claims that Kraken's actions conformed with sanctions and international anti-money laundering regulations. Clients were regularly checked during the registration procedure and while using the exchange services. Particular attention was paid to IP address information. This measure is required to prevent people in sanctioned territories from creating accounts.

However, despite these controls, between approximately October 14, 2015 and June 29, 2019, Kraken processed 826 transactions, totaling approximately $1,680,577.10, on behalf of individuals who appeared to have been located in Iran at the time of the transactions,

according to the OFAC statement.

Although it currently seems that such violations are always obvious, but the platform didn’t notice them. As a result, IP addresses were not blocked and Iranian individuals were free to access their accounts and carried out 826 illegal transactions. After detecting the problem, the exchange implemented automated IP blocking and additional blockchain analytics tools to monitor the situation.

While determining the amount of the fine, OFAC considered the fact that the exchange had reported the potential violations. This allowed OFAC officials to find a compromise between the maximum civil monetary penalty (CMP, $272,228) and the penalty for violating economic sanctions (50% of each illegal transaction, $840,288).  Therefore, taking into consideration the admission of guilt, Kraken will have to pay $362,159.

Also, the crypto exchange promptly responded to the conflict situation by implementing a variety of additional measures. Kraken trained staff on blockchain analytics, hired an additional supervisor to control sanctions compliance, and partnered with an AI tool provider to detect and authenticate user nationality. Additionally, automatic control was implemented for blocking accounts whose creators are located on the territory of Crimea, and unrecognized “DPR” and “LPR.”

A few days after the OFAC statement was published, it was revealed that Kraken was firing one-third of its employees due to the crypto winter. Around 1,100 people were laid off, bringing the company's workforce back to where it was in late 2021.

I’m confident the steps we are taking today will ensure we can continue to deliver on our mission which the world needs now more than ever before. I remain extremely bullish on crypto and Kraken,

said Jesse Powell, Kraken’s co-founder and CEO, in response to the huge layoffs.

Recall that Kraken joined the top crypto exchanges in October that banned Russian users from using their services. Accounts registered in the Russian Federation were frozen, and their owners were offered to submit an official application for withdrawal of funds.