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BitPay Settles With OFAC For Apparent Multiple Sanctions Violations

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Bitcoin payment processor BitPay has reached a $507,375 settlement with the U.S. Treasury's Office of Foreign Asset Control (OFAC) to resolve its potential civil liability for 2,102 apparent violations of multiple sanctions programs involving digital currency transactions, according to an Enforcement Release by the U.S. Treasury.

The financial intelligence and enforcement agency administers and enforces economic and trade sanctions in support of U.S. national security and foreign policy objectives. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions.

BitPay is charged of failing to prevent persons apparently located in sanctioned areas such as the Crimea region of Ukraine, Cuba, North Korea, Iran, Sudan, and Syria, from transacting with merchants in the U.S. and elsewhere using digital currency on BitPay's platform.

BitPay allowed the transactions despite having location information, including Internet Protocol (IP) addresses and other location data, about those persons prior to effecting the transactions.

The OFAC said BitPay's sanctions compliance program deficiencies enabled persons in these sanctioned jurisdictions, based on their IP addresses and information available in invoices, to engage in approximately $129,000 worth of digital currency-related transactions with BitPay's merchant customers. These 2,102 transactions took place between approximately June 10, 2013 and September 16, 2018.

OFAC claims that while BitPay screened its direct customers such as merchants against OFAC's List of Specially Designated Nationals and Blocked Persons (SDN List) and conducted due diligence, it failed to screen location data that it obtained about its merchants' buyers.

BitPay apparently violated Executive Order 13685 of December 19, 2014 by failing to prevent users located in these sanctioned areas to access and use its services to engage in digital currency transactions.

The OFAC determined that BitPay did not voluntarily self-disclose the apparent violations and that the apparent violations constitute a non-egregious case.

The statutory maximum civil monetary penalty applicable in this matter is $619.69 million. However, BitPay got away with a small penalty as it is a relatively small company and has not received a penalty notice or Finding of Violation from OFAC in the past five years preceding these apparent violations.

In early January, U.S.-based digital asset financial services firm BitGo, Inc. also entered into a $98,830 settlement with the OFAC to resolve similar charges.

BitPay is the first blockchain payment processor and the first non-exchange to secure BitLicense, a virtual currency license, from the New York State Department of Financial Services (NYDFS) in July 2018.

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