Washington, D.C. (December 27, 2023) - CoinList Markets, a virtual currency exchange based in San Francisco, has consented to a settlement exceeding $1.2 million in response to allegations from the U.S. Treasury Department's Office of Foreign Assets Control (OFAC). The allegations claimed that CoinList violated U.S. sanctions by facilitating 989 transactions for users residing in the Crimea region of Ukraine from April 2020 to May 2022.

Details of the Apparent Violations

CoinList Markets LLC (CLM), a money services business established in 2017, enables users to trade in cryptocurrencies. Users create an account and digital wallet with CLM, providing personal or business information as part of the Know-Your-Customer process.

CLM had several measures in place to comply with sanctions, including screening customers against sanctions lists, monitoring transactions, and using blockchain analytics tools. From February 2021, CLM denied access to users with IP addresses in sanctioned areas and rejected applications from users in sanctioned jurisdictions.

However, CLM's procedures failed to identify users who listed their residence in a non-embargoed country but provided an address in Crimea. Specifically, CLM opened 89 accounts for customers who listed "Russia" as their residence but provided addresses in Crimea. Between April 19, 2020, and May 7, 2022, CLM provided financial services to these users by way of the 989 transactions, which were found to be apparent violations of the Ukraine-/Russia-Related Sanctions Regulations, 31 C.F.R. § 589.207, totaling $1,252,280.

The Penalty

The maximum penalty applicable to this matter is $327,306,583. While OFAC determined that these apparent violations were not voluntarily self-disclosed, it found that they were non-egregious, so the base civil monetary penalty amount applicable in this matter was calculated to be $3,097,000.

In determining the settlement amount, OFAC took note of several aggravating and mitigating factors. Aggravating factors included CLM's failure to flag accounts of residents of Crimea, knowledge of conducting transactions for persons likely resident in Crimea, and the harm to the policy objectives of the sanctions. Mitigating factors included the absence of a Penalty Notice or Finding of Violation to CLM in the five years preceding the violations, CLM's cooperation with OFAC's investigation, the small volume of apparent violations relative to CLM's total annual transactions, and CLM's remedial measures.

Ultimately, OFAC determined the settlement amount to be $1,207,830, of which $300,000 will be suspended pending satisfactory completion of CLM's compliance commitments. Additionally, CLM has agreed to invest $300,000 of the settlement amount in additional sanctions compliance controls.

Compliance Considerations

The CoinList settlement serves as a reminder of the importance of rigorous sanctions compliance for businesses operating in the virtual currency exchange sector. OFAC has provided a compliance guidance for the virtual currency industry, which can be accessed, available here. The settlement amount of $1,207,830 is a clear indication of the potential financial and reputational risks businesses face when they fail to comply with regulatory standards. This incident highlights the necessity for all businesses, particularly those in the emerging technology sectors, to maintain robust and effective sanctions compliance programs to prevent potential violations.

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