The U.S. Treasury has settled with BitGo over charges that it facilitated users in sanctioned areas to transact using its crypto wallet services between 2015 and 2019.
BitGo, an institutional crypto custodian service and wallet operator, did not do due diligence in blocking wallet users based in Crimea, Cuba, Iran, Sudan and Syria, said the Treasury’s Office of Foreign Asset Controls in a Dec. 30 announcement. OFAC said of BitGo:
“BitGo failed to exercise due caution or care for its sanctions compliance obligations when it failed to prevent persons apparently located in sanctioned jurisdictions to open accounts and send digital currencies via its platform as a result of a failure to implement appropriate, risk-based sanctions compliance controls.”
The Treasury wrote that there were 183 “apparent violations” of its various sanctions programs, adding up to just over $9,000 in transactions. They retain the status of “apparent” as the accusations are based on the IP addresses from which users accessed BitGo hot wallets. In mitigating factors, the Treasury said that: “BitGo screens all accounts, including “hot wallet” accounts, against OFAC’s Specially Designated Nationals and Blocked Persons List, including blocked cryptocurrency wallet addresses identified by OFAC.”
The settlement will cost BitGo $98,830. Given the hawkishness of OFAC’s programs, the settlement is relatively lenient, even though the actual value transacted was less than 10% of the fine. The civil penalty, had the case gone to court, would have been between $183,000 and $53 million.
But today’s action is certainly significant for other crypto companies. The announcement makes clear that OFAC will be looking more closely at crypto servicers:
“This action highlights that companies involved in providing digital currency services — like all financial service providers — should understand the sanctions risks associated with providing digital currency services and should take steps necessary to mitigate those risks.”
U.S. regulators are upping their expectations for companies handling virtual currencies to know the customers on the other end. Just before Christmas, the U.S. Treasury proposed rules requiring registered financial institutions to know the identity of users of self-hosted wallets with which they are transacting.
A number of countries under U.S. sanctions have shown interest in using crypto to circumvent them. Venezuela’s Maduro regime is famously interested in Bitcoin, though its own Petro token has failed to catch on. Iran has similarly been a target for OFAC’s crypto sanctions.