On February 18, 2021, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) entered into a $507, 375 settlement with BitPay, Inc. (“BitPay”) for 2,102 apparent violations of multiple sanctions programs. BitPay, a crypto-currency company offering payment processing solutions for merchants to accept digital currency as payment for goods and services, agreed to settle its potential civil liability for allowing persons who appear to have been located in the Crimea region of Ukraine, Cuba, North Korea, Iran, Sudan, and Syria to transact with merchants in the United States and elsewhere.
According to the settlement announcement, BitPay had location information, including Internet Protocol (IP) addresses and other location data, about those persons prior to effecting the transactions. BitPay “received digital currency payments on behalf of its merchant customers from those merchants’ buyers who were located in sanctioned jurisdictions, converted the digital currency to fiat currency, and then relayed that currency to its merchants.” While BitPay would screen its direct customers (i.e., the merchants) against OFAC’s Specially Designated Nationals (SDN) List to ensure they were not located in a sanctioned country, BitPay did not screen the location data concerning the merchants’ buyers. As a result, persons in these sanctioned jurisdictions were able to engage in approximately $129,000 worth of digital currency-related transactions.
The statutory maximum civil monetary penalty that could have been applied for these apparent violations was $619,689,816. OFAC, while stating that BitPay did not voluntarily self-disclose the apparent violations, noted several mitigating factors and determined that the violations were non-egregious under its enforcement guidelines. This settlement highlights that crypto-currency companies offering digital currency payment services face significant sanctions compliance risk. Like more traditional banking and financial institutions, crypto-currency companies that facilitate or engage in online commerce or process transactions using digital currency are expected to implement robust screening procedures to ensure that they do not engage in unauthorized transactions prohibited by OFAC sanctions.