Crypto exchange Bittrex coughs up $53m to end claims of US sanctions busting

Feds also said the biz sucked at policing transactions for suspicious activity – as if!

Bittrex will cough up $53 million after being accused of flouting US sanctions and breaking federal money laundering laws and other banking rules.

Specifically, the cryptocurrency exchange will pay $24 million to settle allegations made by the US Treasury's Office of Foreign Assets Control (OFAC), and $29 million to the Treasury's Financial Crimes Enforcement Network (FinCEN) to settle that agency's claims. This will be OFAC's largest virtual currency enforcement action ever, and the first parallel enforcement actions by the two federal orgs in the crypto-coin space.

Bellevue, Washington-based Bittrex allegedly did business with netizens in Cuba, Iran, Sudan, Syria, and Crimea, which would be in violation of US sanctions, according to OFAC. The Treasury argued that the virtual currency exchange should have known certain users were located in these sanctioned countries based on the IP and physical address info collected during the customer on-boarding process.

"As a result of deficiencies related to Bittrex's sanctions compliance procedures, Bittrex failed to prevent persons apparently located in the sanctioned jurisdictions from using its platform to engage in over $263,000,000 worth of virtual currency-related transactions," the settlement agreement reads.

To settle these charges, the crypto exchange agreed to pay $24,280,829.20

The digital money outfit also "willfully" violated America's Bank Secrecy Act's anti-money laundering and suspicious activity report reporting requirements, FinCEN claimed. This ultimately cost the biz another $29,280,829.20.

Under this US law, banks and other "money services businesses" such as Bittrex must implement an anti-money laundering program to prevent criminals from exploiting the corporation to clean their ill-gotten gains and financing terrorist activities. These programs must include education and training for employees on how to detect suspicious transactions, and they require financial institutions to file suspicious activity reports.

But, according to FinCEN, Bittrex did a really shoddy job at this, too.

According to court paperwork filed by FinCEN [PDF]:

For example, in 2016, Bittrex averaged 11,000 transactions (deposits and withdrawals) per day on its platform, with a daily value of approximately $1.54 million. Instead of utilizing widely available transaction monitoring software tools to screen the transactions for suspicious activity, the company relied on two employees with minimal [anti-money laundering] training and experience to manually review all of the transactions for suspicious activity.

Then, a year later, when the exchange's transaction volume increased to 23,800 per day, and its daily value hit $97.9 million, "the company continued to rely on the same two employees to manually review all of its transactions for suspicious activity," FinCEN said, adding that this manual process was "demonstrably ineffective."

The firm failed to file a single suspicious activity report between 2014, when it was founded, through May 2017.

"For years, Bittrex's anti-money laundering program and suspicious activity reporting failures unnecessarily exposed the US financial system to threat actors," said FinCEN Acting Director Himamauli Das in a statement.

"Bittrex's failures created exposure to high-risk counterparties including sanctioned jurisdictions, darknet markets, and ransomware attackers." ®

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