Kraken Crypto Exchange Under Investigation for Alleged Sanctions Violations

The New York Times reports that Kraken is under investigation by the United States Treasury’s Office of Foreign Assets Control for violating sanctions. The department is investigating whether users in sanctions-hit countries were allowed to buy and sell crypto.

The Kraken exchange has come under the radar of the United States Treasury’s Office of Foreign Assets Control (OFAC) for allegedly violating sanctions. The Treasury is investigating whether Kraken allowed users in sanctions-hit countries to buy and sell cryptocurrencies, sources told the New York Times on July 26. Neither Kraken nor the Treasury has confirmed the investigation.

The inquiry started as far back as 2019, and the New York Times cited “five people affiliated with the company or with knowledge of the inquiry.” These individuals said that the U.S. government may impose a fine on the exchange, which has already faced off with other regulatory authorities in the country. The U.S. ​​Commodity Futures Trading Commission (CFTC) laid charges against the exchange in 2021, imposing a $1.25 million fine.

The Treasury is examining if the exchange facilitated the trading of assets in accounts based in Iran, Syria, and Cuba. A former employee reportedly allegedly said that Kraken had been generating revenue from users in those countries.

The report said that there were more than 1,500 users in Iran, 149 users in Syria, and 83 in Cuba. The investigation underscores the growing efforts by authorities to impose control over the crypto market.

Crypto under the spotlight for use in sanctions-hit countries

Lawmakers have become increasingly concerned about the role of crypto in avoiding sanctions. Several authorities have noted that crypto hinders the effects of sanctions, leading to increased scrutiny.

These departments have warned crypto exchanges not to allow their services to function in sanctions-hit countries, including Russia. Some have complied, like Binance, which closed multiple accounts linked to senior Russian officials. Others have been a little more resistant, with Kraken saying in March 2022, that it would not ban unsanctioned users.

North Korea’s hacking of crypto entities has also caught the attention of governmental departments, including the U.S. Treasury. The department sanctioned 3 ETH addresses allegedly linked to North Korea in April 2022.

EU also accelerating the regulation game

The U.S. is not the only major region to clamp down on the crypto market. The European Union (EU) has also taken several steps to prevent illicit activity and ensure investor protection.

EU member states finalized sweeping regulations for the crypto industry in July 2022. As a result, many crypto exchanges began setting themselves up for operation in the region.