CoinList Markets LLC settles with OFAC for $1.2M+

CoinList Markets LLC (“CLM”), a San Francisco, California-based virtual currency exchange, has agreed to pay $1,207,830 to settle its potential civil liability arising from processing 989 transactions on behalf of users ordinarily resident in Crimea between April 2020 and May 2022, in apparent violation of OFAC’s Russia/Ukraine sanctions. The settlement amount reflects OFAC determination that CLM’s apparent violations were not voluntarily self-disclosed and were non-egregious.

CLM, a money services business founded in 2017, allows users to buy, sell, and otherwise trade in crypto tokens and other crypto assets. CLM acts primarily as an intermediary among its users to buy, sell and convert various cryptocurrencies. To do so, users open an account and digital wallet with CLM, during which they provide certain Know-Your-Customer (KYC) information. Individuals, for example, must provide their country of residence, address, date of birth, phone number, selfie picture, and a photo of government issued identification card. Entities must provide similar information, including incorporation documents, country of incorporation, company address, shareholders with 25 percent or more ownership, and information about the entity’s signatories.

During the relevant period, CLM maintained several sanctions compliance measures, including screening new and existing customers against OFAC and other sanctions lists, conducting transactional monitoring, and blockchain analytics tools to identify touchpoints with high-risk jurisdictions and sanctioned wallet addresses. When a user submitted an order to trade in virtual currency, moreover, CLM placed a hold on the user’s wallet for the amount requested and reviewed it for suspicious activity. Beginning in February 2021, CLM also instituted controls to deny access to users with IP addresses in sanctioned jurisdictions. By spring 2021, CLM’s onboarding protocols also included an automated process through which an application was meant to be immediately rejected if a user presented an identification card from, or provided a physical address in, a comprehensively sanctioned jurisdiction.
However, CLM’s screening procedures failed to capture users who represented themselves as resident of a non-embargoed country but who nevertheless provided an address within Crimea. In particular, CLM opened 89 accounts for customers, nearly all of whom had specified “Russia” as their country of residence but all of whom provided addresses in Crimea upon account opening, e.g., by identifying a city in Crimea or providing the term “Crimea.” Because “Russia” was provided in the country-of-residence field in these instances, CLM’s screening protocols failed to recognize that “Crimea” or a city name in Crimea, provided in another data field, indicated likely residence in Crimea.

In providing financial services to these users between April 19, 2020 and May 7, 2022, CLM engaged in 989 apparent violations of the Ukraine-/Russia-Related Sanctions Regulations (URRSR), 31 C.F.R. § 589.207, totaling $1,252,280 (the “Apparent Violations”). The statutory maximum civil monetary penalty applicable in this matter is $327,306,583. OFAC determined that the Apparent Violations were not voluntarily self-disclosed and were non-egregious. Accordingly, under OFAC’s Economic Sanctions Enforcement Guidelines (“Enforcement Guidelines”), the base civil monetary penalty amount applicable in this matter equals the applicable schedule amount, which in this case is $3,097,000. The settlement amount of $1,207,830 reflects OFAC’s consideration of the General Factors under the Enforcement Guidelines, including CLM's cooperating during the investigation and taking remedial measures to mitigate the risk of more violations.

In view of the individual facts of this case, including CLM’s financial circumstances, $300,000 of the settlement amount will be suspended pending satisfactory completion of CLM’s compliance commitments as agreed to by CLM as part of this settlement. Moreover, as partial satisfaction of the settlement amount, CLM has also agreed to invest $300,000 in additional sanctions compliance controls, including with respect to enhanced screening controls and additional compliance staff.