Uphold HQ Inc. OFAC Settlement: $72.2K (2023)

Uphold is a global multi-asset digital trading platform founded in 2014 that allows customers to move, convert, and hold currency (traditional and virtual) or commodities to enable foreign exchange and cross-border remittances.

Between March 2017 and May 2022, Uphold or certain of its non-U.S. affiliates maintained accounts for customers who provided information during account onboarding indicating their location in Iran or Cuba. In some cases, customers selected a non-sanctioned country from a drop-down menu but indicated their location in a sanctioned jurisdiction in a free text address field, which Uphold did not screen for sanctions compliance. In other cases, customers provided an identification document from a sanctioned jurisdiction, which Uphold also did not screen or flag. As a result, Uphold or its affiliates processed 53 transactions totaling $22,870.02 for customers who self-identified as being located in Iran, 16 transactions with an Iranian virtual currency exchange totaling $13,705.50, and 25 transactions totaling $142,683.74 for customers who self-identified as being located in Cuba. This conduct resulted in 69 apparent violations of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. §§ 560.204, 560.206, and 560.215, and 25 apparent violations of the Cuban Assets Control Regulations, 31 C.F.R. § 515.201.

Between August 9, 2019 and October 19, 2020, Uphold processed 58 transactions totaling $1,316.54 on behalf of two customers who self-identified during enhanced customer diligence as employees of government-owned Petroleos de Venezuela S.A. (PdVSA), in apparent violation of Executive Order 13884 and the Venezuela Sanctions Regulations, 31 C.F.R. § 591.201. E.O. 13884, issued on August 5, 2019, blocked the property and interests in property of the Government of Venezuela (GoV), including any person owned or controlled by the GoV and any person acting on behalf of such entities. In the fall of 2021, Uphold began collecting enhanced customer diligence information that included employment information from customers meeting certain predefined criteria, but did not use this information to ensure compliance with E.O. 13884 until May 2022.

The statutory maximum civil monetary penalty applicable in this matter is $44,468,494. OFAC determined that the apparent violations were voluntarily self-disclosed and non-egregious. Under OFAC's Economic Sanctions Enforcement Guidelines, the base civil monetary penalty equals the sum of one-half of the transaction value for each apparent violation, which is $90,288.90. The settlement amount of $72,230.32 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

This case underscores the importance of financial institutions, including those that provide services related to virtual and traditional currencies, maintaining robust controls to screen information provided by customers to identify sanctions risks. In particular, information provided by customers during the account opening and diligence processes, such as identification and location information, should be considered for screening. Financial institutions should also consider ways to address the potential for customers to circumvent such screening controls.

With respect to Venezuela-related transactions, OFAC noted in Frequently Asked Question (FAQ) 680 that it expects financial institutions to conduct due diligence on their own direct customers to confirm that those customers are not persons whose property and interests in property are blocked, such as employees of the GoV, including state-owned entities.

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