CoinList: Navigating Waters of Compliance

CoinList, the cryptocurrency exchange and token listing platform, has willingly agreed to a settlement payment exceeding $1.2 million to the Office of Foreign Assets Control (OFAC) within the United States Department of Treasury. This resolution stems from alleged breaches linked to the Russia/Ukraine sanctions, even though CoinList had seemingly adhered to diverse compliance measures. Intriguingly, the platform was found to have allowed users situated in Russia with Crimea addresses to open accounts, a revelation highlighted by OFAC's discerning scrutiny.

OFAC characterizes CoinList's sanctions violations as "not flagrantly egregious"

In a disclosure made on December 13, 2023, OFAC asserted that CoinList, despite demonstrating compliance in various aspects, processed a substantial 989 financial transactions for 89 users during the period spanning from April 2020 to May 2022. It was noted that these users, upon the initiation of their accounts, disclosed addresses in Crimea, often designating Russia as their country of residence. Crimea, internationally acknowledged as part of Ukraine, has been under Russian annexation since 2014, triggering widespread sanctions.

The financial transactions for users in Crimea during this two-year window amounted to a rather precise $1,252,280. OFAC explicitly stated that there was no indication that these transactions would have been licensable or connected to humanitarian activities. OFAC, however, raised concerns about CoinList's apparent awareness, or lack thereof, regarding its provision of services to customers in Crimea. The regulatory body criticized the platform for its perceived failure to institute robust internal controls capable of flagging accounts associated with Crimea residency.

OFAC, in a somewhat mitigating tone, categorized the violations by CoinList as "non-egregious." This choice of wording hinted at the fact that the potential maximum fine for such infractions could have exceeded a staggering $327 million. The settlement amount, nevertheless, was settled at $1,207,830. OFAC justified this decision by pointing to CoinList's cooperative stance during investigations, the absence of prior violations in the preceding five years, and the relatively modest size of the recent transgression when measured against its overall annual transaction volume.

CoinList Implements Corrective Actions in the Wake of OFAC Breaches

In response to these regulatory challenges, CoinList undertook remedial measures. These included the implementation of IP geo-blocking measures to restrict access from jurisdictions under sanctions, an upgrade to filter settings to automatically identify and reject users from Crimea, and a strategic increase in the hiring of experienced compliance personnel. Notably, CoinList committed to investing $300,000 in what it termed "additional sanctions compliance controls" as part of the settlement agreement with OFAC.

Having originated in 2017, CoinList's ascent to a valuation of $1.5 billion in 2021, following a substantial $100 million in Series A funding, adds a layer of context to its recent regulatory challenges. Furthermore, in November 2022, the platform found itself addressing persistent rumors of bankruptcy, asserting that it was not undergoing a liquidity crunch despite user grievances regarding withdrawal delays extending over a week.

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