OFAC Fines Financial Digital Trading Platform for Sanctions Violations
The Office of Foreign Assets Control on March 31 fined a California money services firm just over $72,000 for violating U.S. sanctions against Iran, Cuba and Venezuela. OFAC said Uphold HQ, a global digital trading platform, failed to screen transactions for customers located in Iran or Cuba and for employees of a sanctioned Venezuelan energy company, resulting in 152 transactions worth more than $180,000.
Between 2017 and 2022, the company and its affiliates maintained accounts for customers who “provided information during the account onboarding process indicating their location in Iran or Cuba,” OFAC said. Uphold didn’t screen those locations to make sure it was complying with U.S. sanctions, the agency said, and processed 53 transactions worth $22,870.02 for customers located in Iran, 25 transactions totaling $142,683.74 for customers located in Cuba, and 16 transactions with an Iranian virtual currency exchange totaling $13,705.50.
In 2019 and 2020, Uphold also processed 58 transactions totaling $1,316.54 for two customers who said they were employees of Petroleos de Venezuela, Venezuela’s state-owned energy company. Uphold in 2021 began “collecting enhanced customer diligence information,” including employment information, but “did not use this information” to ensure it was complying with sanctions against Venezuela until May 2022, OFAC said.
The agency said the maximum civil monetary penalty for Uphold was more than $44 million, but the agency decided on a lower amount because the company voluntarily disclosed the violations and the penalties were non-egregious. OFAC also pointed to several mitigating factors, including the fact that Uphold hadn’t received a penalty notice in the previous five years and cooperated with OFAC’s investigation, providing the agency with “well-organized and detailed documentation and spreadsheets.”
Uphold also entered into a tolling agreement with OFAC and undertook “numerous” remedial compliance measures, including suspending account access to all sanctioned users, weekly “quality assurance testing” of its screening systems, “real-time virtual currency wallet address screening,” sanctions training for its staff, more compliance department resources “in line with growth of the business” and periodic sanctions risk assessments. The company also implemented a new “information technology solution” to screen customer information and introduced automatic restrictions against users who try to send transfers to “beneficiaries” in sanctioned jurisdictions.
OFAC also pointed to several aggravating factors, including the fact that Uphold “failed to exercise due caution or care” when it onboarded or screened customers. Based on the information the customers provided to Uphold, OFAC said the company “had reason to know” it was processing payments for people in sanctioned jurisdictions.
The agency said the case highlights the importance of financial firms “maintaining robust controls to screen information provided by customers to identify sanctions risks.” OFAC said companies should be screening information provided by customers during “account opening and diligence processes” and should “consider ways to address the potential for customers to circumvent such screening controls.”
"We appreciate that OFAC recognized our full cooperation and remediation of the issues involved in this matter," Uphold CEO Simon McLoughlin said in a March 31 statement. "These were self-identified and self-reported matters that reflect the rigour of our compliance review processes."