FINTRAC Penalizes Binance $6M for Compliance Failures

The cryptocurrency exchange Binance is once again in the regulatory spotlight as the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) imposes a significant penalty for violations of anti-money laundering (AML) and counter-terrorist financing (CFT) regulations. On May 7, 2024, FINTRAC announced an administrative monetary penalty of $6,002,000 against Binance Holdings Limited, also known as Binance Holdings (IE) Ltd.,, Binance Global, and Binance.

The penalty stems from two main administrative violations. Firstly, Binance failed to register with FINTRAC as a foreign money services business (FMSB), despite being obligated to do so under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Secondly, the exchange neglected to report large virtual currency transactions exceeding $10,000 on 5,902 separate occasions between June 1, 2021, and July 19, 2023.

According to FINTRAC, Binance was given multiple opportunities to register as an FMSB but failed to comply with the regulatory requirements. The failure to register persisted until Binance officially ceased its operations in Canada on September 25, 2023. Additionally, the exchange’s non-reporting of large virtual currency transactions deprived FINTRAC of vital information for combating money laundering and terrorist financing activities.

This penalty adds to Binance’s growing list of regulatory challenges worldwide. In November 2023, the exchange settled with U.S. authorities, agreeing to a $4.3 billion fine for alleged violations of U.S. anti-money laundering laws. As part of the settlement, Binance’s former CEO, Changpeng Zhao, stepped down and pleaded guilty to one felony charge, resulting in a four-month prison sentence.

Binance’s troubles extend beyond North America. In Nigeria, two Binance executives face charges of tax evasion and money laundering. One executive has been arrested, while the other reportedly fled to Kenya. Interpol stands ready to extradite the fugitive executive to Nigeria, where legal proceedings are ongoing.

The regulatory scrutiny and legal entanglements facing Binance highlight the challenges inherent in the cryptocurrency industry’s regulatory landscape. As digital assets gain mainstream acceptance, regulators worldwide are ramping up efforts to ensure compliance with AML/CFT regulations and protect investors’ interests.

As the cryptocurrency industry matures, regulatory compliance remains a cornerstone of sustainable growth and market integrity. Binance’s experience serves as a cautionary tale for industry participants, highlighting the consequences of regulatory non-compliance and the imperative of adhering to AML/CFT regulations in an increasingly regulated environment.

Photo by Jared VanderMeer