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Kraken Settles With the SEC and Pays $362K for Violating U.S Sanctions on Iran

The U.S. Office of Foreign Assets Control (OFAC) has made it clear that it will keep imposing fines on cryptocurrency exchanges for alleged violations of the U.S. sanctions system. This time it was the turn of Kraken, one of the oldest crypto exchanges in the U.S. Who will be next?

Kraken, a well-known American crypto exchange, agreed to pay a fine of more than $362,000 to the Treasury Department’s Office of Foreign Assets Control (OFAC) for “apparently” violating U.S. sanctions against the people of Iran.

According to the OFAC release, Kraken agreed “to settle its potential civil liability,” which could come along with possible violations of the Iranian Transactions and Sanctions Regulations.

In addition, the exchange agreed to “invest” $100,000 in certain additional sanctions compliance controls, including training its staff and implementing technical controls to assist in sanctions detection.

Kraken Processes Over $1.6 Million in Iranian User Transactions

Despite having a sanction compliance and anti-money laundering program in place, Kraken processed 826 transactions, totaling approximately $1,680,577.10, on behalf of users who “appeared” to be located in Iran. Cryptopotato first reported about the SEC investigations on the exchange back in June of 2022.

These transactions were conducted between October 14, 2015, and June 29, 2019. This means that regulators are doing a thorough job on the exchanges’ transaction history to avoid any possible evasion of U.S. sanctions.

According to OFAC, Kraken incurred 826 “apparent violations” of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. § 560.204.

Kraken Could Have Faced a Fine of $272 Million.

Kraken implemented automatic blocking of I.P. addresses linked to Iran and multiple other blockchain monitoring and analysis tools after realizing the problems it was incurring and informing regulatory authorities.

Thanks to its commitment to resolving the problem and its acceptance of guilt, Kraken avoided paying a maximum fine amounting to more than $272 million.

Kraken thus joins the list of exchanges fined by OFAC, including Bitgo for $98,000; BitPay for more than $500,000; and Bittrex, which agreed to pay more than $53 million to OFAC and FinCEN for alleged violations of the sanctions programs.

Comply And Criticized The Law When Necessary

Jesse Powell, the former CEO of Kraken, has been very vocal about his libertarian views, engaging in debates and even taking action when he considered it to be pertinent. For example, he refused to comply with a demand from the Ukrainian government to block Russian users.

He also moved Kraken’s HQs away from New York in 2018 when the infamous BitLicense made it difficult for the exchange to operate properly. Powell had strong words against the government back then when he criticized the law and all the requirements it contained:

“To service New York today, what we’d have to do is create a special purpose entity just to service New York”

This settlement puts an end to a controversial chapter of Kraken’s history. The exchange is now fully clear in terms of regulatory obligations with the United States.

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