Crypto exchange Poloniex has reportedly agreed to pay a fine to settle violations with OFAC. The exchange was accused of violating sanctions imposed on certain regions (Crimea, Syria, etc.).
Between 2014 and 2019, Poloniex failed to prevent residents of certain regions from trading, depositing, and withdrawing funds from the platform. This resulted in a total illegal turnover of approximately $15.3 million and over 65,000 confirmed violations. Despite the availability of tools to identify such users, the exchange did not take adequate measures to block them.
Although Poloniex attempted to address the situation by launching a sanctions compliance program, it only applied to new clients and was not extended to existing ones. Furthermore, the newly introduced IP address verification only blocked a handful of accounts, highlighting the exchange's clear violations.
Poloniex conducted additional diligence on such logins, including contacting the owner of the relevant account, and closed certain accounts based on that diligence. Poloniex did not begin implementing a block on such IP addresses until June 2017. Poloniex implemented sanctions controls related to customers in the Crimea region of Ukraine only in August 2017,OFAC reports.
OFAC considers Poloniex's lack of caution regarding its obligations after entering the international market an aggravating factor. This means that the exchange compromised several sanction programs.
However, despite not providing information voluntarily, Poloniex managed to significantly reduce the fine thanks to several factors. Firstly, the damage caused was not deemed critical. Secondly, at the time of the offense, the exchange was a small and emerging enterprise. Thirdly, OFAC acknowledged the exchange's cooperation with the investigation and the changes implemented by Circle after acquiring Poloniex but before the official investigation began. OFAC has also stressed that cryptocurrency projects are responsible for sanction violations at the same level as traditional financial corporations.
In essence, the government agency's official position is that companies should establish a sanctions compliance program from the outset of their business model, particularly if their strategy involves going global. Each firm's program will be unique, depending on various factors like business type, size, complexity, and services offered. However, internal controls and auditing should be mandatory for all companies.
