Corruption, Crime, & Compliance – Cryptocurrency and Sanctions … – JD Supra

Cryptocurrency has become a popular way to invest and transact, but with that comes the need for sanctions compliance. In this episode, Michael Volkov and Matt Stankiewicz discuss the recent enforcement actions against Poloniex, Bittrex, and Kraken for violating US sanctions regulations with cryptocurrency transactions. Matt is a Partner at Volkov Law and a leading cryptocurrency expert. He and Michael dive into the common themes and basic failures that led to these enforcement actions, including IP blocking, transaction monitoring, Seemore+

1. Cryptocurrency companies are struggling to implement KYC and geo-blocking controls, which is leading to violations involving sanctioned jurisdictions.

2. OFAC is taking an aggressive stance against cryptocurrency companies. Companies in the cryptocurrency industry need to implement effective sanctions compliance programs to avoid hefty fines and enforcement actions from regulatory authorities.

3. There is no materiality requirement for sanctions violations, and even small transactions can result in multimillion-dollar fines.

4. Retroactively applying controls to existing customers is important, and failing to do so can lead to violations.

5. Companies need to have a comprehensive and automated system in place to detect and prevent violations.

6. Companies need to be vigilant about screening individuals and transactions against the relevant sanctions lists, including screening field text, addresses, and ID cards.

7. Geo-blocking for IP addresses is a crucial compliance control, but it is not perfect and can be circumvented by VPNs.

8. Voluntary disclosure of violations can lead to more favorable outcomes and lower fines from regulatory authorities.

9. OFAC and other regulatory authorities are using analytical tools to monitor transactions and flag potential violations, so cryptocurrency companies should not assume they can go under the radar.

10. Companies can use the public blockchain to monitor transactions and identify potential sanctions risks.

11. Sanctions compliance programs should be regularly reviewed and updated to address new risks and changes in regulations.

KEY QUOTES:

There are a lot of tools available to these companies to monitor transactions, maybe better than in the traditional finance world, just because everything on the blockchain is public record essentially. Matt Stankiewicz

Its just interesting to see OFAC go so aggressively against these companies. Not too surprising considering the extreme sanctions risk that cryptocurrency poses. Very importantly, theres still a lot of takeaways that really any industry can take away from these enforcement actions. Matt Stankiewicz

If you find problems, obviously you want to remediate them, but figure out what you need to do in terms of voluntary disclosures, because typically youll be much better off than if OFAC figures it out on their own, which they usually do. Matt Stankiewicz Seeless-

Continued here:
Corruption, Crime, & Compliance - Cryptocurrency and Sanctions ... - JD Supra