BitPay examined the location and IP of its customers, but not that of its buyers.
OFAC mitigated sanctions on BitPay for collaborating in the investigation, considering them not egregious.
BitPay, the payment service provider for bitcoin and other cryptocurrencies, will pay more than half a million dollars for a sanction that involves transactions between merchants in the United States and clients located in regions sanctioned by the Office of Foreign Assets Control of the Department of the Treasury of this country (OFAC). Within the sanctioned regions with which these transactions were carried out, are Cuba, Syria, Iran, Sudan, North Korea and the Crimea region in Ukraine.
According to the document compliance notice, published on February 18 by OFAC, BitPay carried out 2,102 operations with cryptocurrencies between June 2013 and September 2018, where each operation had an approximate value of USD 100, thus adding a total of USD 128,582.61. How these transactions went with sanctioned countries per OFAC, BitPay would be violating the multiple sanction programs related to digital currency transactions.
According to OFAC, the problem above all is that:
While BitPay examined its direct customers, the merchants, based on OFAC’s list of specially designated nationals and blocked persons (the ‘SDN List’), and conducted due diligence to ensure they were not in sanctioned jurisdictions. BitPay did not examine the location data it obtained about buyers from its merchants.
This despite the fact that the payment service provider had access to the location and IP (Internet Protocol) of the buyers.
Fortunately for BitPay, the transactions from the sanctioned regions were made to gaming merchants (casinos) and online hosting services, so OFAC designated the sanctions as “Not-atrocious.”
This, the collaboration of BitPay for the investigation of the alleged violation, and other mitigating factors, managed to reach an agreement where the payment provider would facilitate USD 507,375 to cover the penalty. The maximum amount for this type of violation ranges from USD 619,689,816 to USD 2,255,000 depending on whether the aggravating factor is disclosed voluntarily or not.
BitPay isn’t the only cryptocurrency-related company that has been sanctioned by OFAC. About a month ago, as CriptoNoticias review, BitGo it had to pay USD 100,000 for the same sanctions, due to the fact that there were transactions on its platform from Crimea, Cuba, Sudan, Iran and Syria. In this case, there were 183 violations committed, from March 2015 to November 2019, and had a total value of USD 9,130
With these sanctions, OFAC emphasizes that each company that operates with digital currencies must be responsible for ensuring that transactions are not made with persons or properties sanctioned by OFAC, or with investments prohibited by the United States government. The agency finally adds that:
To mitigate such risks, administrators, exchanges, and other companies involved in the use of digital currencies must develop a tailored, risk-based penalty compliance program.