Poloniex Exchange, a well-established player in the cryptocurrency exchange space, has come under scrutiny for violating multiple sanctions programs and has reached a settlement with the United States Treasury Department’s Office of Foreign Asset Control (OFAC).
The apparent violation of multiple sanctions could be traced back to January 2014 when Poloniex Inc., registered then, operated an online trading and settlement platform.
Recent reports from the Department of Treasury state that Poloniex is settling 65,942 apparent violations of multiple sanctions programs.
Poloniex Exchange Violates US Multiple Sanction Programs
According to a recent update, the Treasury released a detailed enforcement of the settlement between Poloniex and OFAC. Poloniex was required to pay $7,591,630 as settlement for its apparent violations of US multiple sanction programs from when it started trading operations in January 2014.
Poloniex, which created a platform for digital asset trading, enabled its customers to fund their accounts and engage in other trading activities easily.
Some customers at the initial launch and operation of Poloniex included users from US-sanctioned jurisdictions and countries.
At the time of its trading platform launch in 2014, it was reported that the Poloniex had no KYC (know your customer) process or sanctions compliance program for its users. But this changed in May 2015 when the exchange established a sanctions compliance program and KYC to verify supported users, according to US laws.
However, OFAC had already determined that Poloniex exchange violated the US multiple sanction programs when it failed to exercise due diligence at inception and operated without a sanctions compliance program on its platform for 16 months.
Also, OFAC raised that even when Poloniex implemented a KYC process for users and a sanction compliance program, existing user accounts in sanctioned jurisdictions prior to its KYC development were not revisited to comply with its sanctions compliance program.
Cumulatively, between January 2014 and November 2019, the volume of trades stemming from users in the sanctioned jurisdictions and countries amounted to $15,335,349 on the Poloniex exchange and trading platform.
This was an apparent violation of US multiple sanction programs, which prohibited users from the sanctioned locations from participating in the US-based registered trading platform.
The US-sanctioned locations and jurisdictions at the time included countries and locations such as Sudan, Crimea, Syria, Iran, and Cuba.
OFAC Settles With Poloniex
According to the enforcement release and report from the Treasury, the statutory maximum civil monetary penalty for an apparent violation of US multiple sanctions is $19,692,872,800.
However, the OFAC had determined and resolved in this case that Poloniex’s apparent violations were not voluntarily self-disclosed and were non-egregious.
Nonetheless, OFAC enforcement guidelines stipulate that the minimum civil monetary penalty applicable in this case is $99,237,000 and a settlement amount of $7,591,630, reflecting general factors under its enforcement guideline as seen in this report.
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