Powered By:

Seward-and-Kissel

On July 23, 2021, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced an enforcement action against Payoneer Inc., a money transmitter and provider of prepaid access, for processing payments involving several sanctioned jurisdictions and actors, including those in Crimea, Iran, Sudan, and Syria.

Payoneer paid a $1.4m monetary fine after OFAC found that it had processed over 2,241 payments involving sanctioned jurisdictions over a 5 year period totaling $802,117. Of note in the enforcement action were OFAC’s comments regarding Payoneer’s sanctions compliance program, which was deemed to have several deficiencies. For example, while Payoneer had a sanctions compliance policy that prohibited processing payments in or with sanctioned jurisdictions, Payoneer had not adopted procedures to implement that policy, failing to properly test or audit those processes.

Additionally, OFAC commented on Payoneer’s screening deficiencies. Notably, OFAC observed that Payoneer had insufficient algorithms that allowed close SDN List matches not to be flagged, failed to screen for business identifier codes, allowed flagged and pending payments to be released without review during backlog periods, and failed to focus on location screening, especially IP addresses.

LEGAL TOKENS

This is not the first enforcement action against a money transmitter for compliance-related lapses, and should serve as a reminder to all payment processors that sanctions screening (including location-based screening) is a key step to mitigating regulatory risk. OFAC’s public consolidated Sanctions List is certainly a good place to start, though please note that the OFAC Sanctions List does not incorporate location-based screening, nor does it necessarily address subsidiaries or affiliates that are not expressly listed but still may be the subject of sanctions, among other potential screening gaps.

SUBSCRIBE TO SKRYPTO

Fill out the following form to receive our cryptocurrency news and analysis.

Author's Assets

SK_Jacobson_Headshot

Andrew Jacobson | Associate

A former enforcement attorney at the New York State Department of Financial Services (DFS), Andrew Jacobson represents individual and institutional clients at Seward & Kissel in connection with complex governmental investigations, regulatory probes, and related civil matters. While at the DFS, Andrew was involved in early cryptocurrency issues and brought some of the most significant enforcement actions for violations of U.S. economic sanctions and anti-money laundering laws.

Andrew has extensive experience advising on matters relating to U.S. economic sanctions, including those administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), and anti-money laundering laws. Andrew serves as Chair of the Export Controls, Sanctions, and Anti-Corruption Subcommittee of the International Bar Association, co-chair of the Virtual Commodity Association’s BSA/AML Committee, and is a member of the Digital Chamber of Commerce’s AML Task Force.

As a member of Seward & Kissel’s Blockchain and Cryptocurrency Group, Andrew regularly advises clients on all aspects of financial crimes compliance and licensing in the virtual asset industry, including:

  • OFAC and FinCEN regulatory requirements, including asset blocking and reporting obligations;

  • Unhosted wallets and risks to software providers and VASPs;

  • Privacy coins, mixers, and other external privacy mechanisms;

  • Technology and open-source user platforms;

  • Ransomware and other cyberattack-related ransom payments;

  • BitLicense and state licensing requirements; and

  • Counterparty due diligence and screening.

 

“This is certainly a lesson to senior management to take compliance seriously and that there are consequences for individuals who don’t follow the regulatory regime.”

Andrew’s thoughts on BitMEX indictment, as published in Law360 article “BitMEX Case Seen as Blessing in Disguise for Crypto Sector”