Latvia’s Financial Crime Investigation Service (FNTT) has imposed a record $10 million fine on the crypto payment service provider Payeer for breaching European Union sanctions on Russia. This fine follows Payeer’s continued non-compliance by allowing Russian customers to access crypto wallet services, facilitating transactions through sanctioned banks over a year and a half.
According to an official statement from the FNTT, Payeer facilitated access to its crypto wallet services for individuals and companies in Russia, contravening EU sanctions.
The company allowed Russian customers to purchase cryptocurrency using bank transfers and rubles, channelling funds through banks that were under EU sanctions. These activities occurred over an extended period of a year and a half, pointing out persistent non-compliance.
Payeer, which registered as a company in Lithuania on October 20, 2022, officially began its operations on January 17, 2023. However, the FNTT revealed that the firm had a prior history in Estonia, where its license for crypto exchange activities was revoked.
The Lithuanian registration appeared to be an attempt to continue operations incompatible with international sanctions.
In addition to the hefty $10 million fine for sanctions violations, Payeer has been slapped with a separate $1.15 million penalty for breaching Latvian anti-money laundering (AML) and counter-terrorism financing protocols.
The FNTT accused Payeer of intentionally neglecting adequate ID checks on customers to maintain its income flow, further compounding its legal troubles.
Broader EU crackdown
The latest development comes amid a broader EU crackdown on crypto firms that aid in circumventing sanctions.
In October 2022, the EU prohibited crypto wallets operated by European entities from providing services to Russians as part of its eighth sanctions package.
Subsequent measures, including the 12th and 14th sanctions packages, have intensified restrictions on Russian access to crypto services.
The EU’s stance has forced many European crypto providers to block Russian bank accounts, aiming to sever financial links supporting Russia’s military actions in Ukraine. These sanctions are part of a concerted effort to target high-value sectors of the Russian economy, including energy, finance, and trade.
Recent investigations have also uncovered significant violations among crypto companies in Estonia and Latvia, with allegations of fraudulent schemes, money laundering, sanctions evasion, and financing of Russian organizations, such as the Wagner PMC.
Estonian crypto exchanges, including Coinsbit, have been implicated in these activities, with over €1 billion potentially laundered through these platforms.
The EU’s crackdown on Payeer signals a growing resolve to enforce compliance within the crypto industry. This follows the European Council and Parliament’s agreement on stricter regulations for crypto firms to bolster AML measures.
Beginning in January, crypto firms will be required to implement stricter scrutiny of their customers, particularly for transactions exceeding €1,000. These measures aim to prevent the use of cryptocurrencies in illegal activities or to evade sanctions.
