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Binance’s Canadian Fine

Author: Syedur Rahman  9 May 2024
2 min read

Syed Rahman outlines the exchange’s money laundering penalty.

The Financial Transactions and Reports Analysis Centre of Canada (Fintrac) has imposed an administrative penalty of C$6 million ($4.4 million) on cryptocurrency exchange Binance for violating the country’s anti-money laundering law. 

Fintrac said that while conducting a compliance review in 2023 it found that Binance had failed to register with the financial intelligence unit and report 5,902 virtual currency transactions worth over C$10,000 that took place on the exchange between 2021 and 2023.

Binance no longer operates in Canada. It shut down its operations in the country last year, blaming Canada’s tightened crypto regulations.

Last November, Binance agreed to pay $4.3 billion to US authorities to resolve similar claims that it knowingly operated in the country without authorisation and ignored anti-money laundering and sanctions regulations.

Binance has had a range of woes in recent times. With the exchange suspending operations in Canada and limiting operations in the UK, some may question whether Binance must alter the way in which it operates - or whether it is actually the onerous regulations that should be blamed. It would, in fairness, be a stretch to suggest it is the latter, in light of the recent fines suffered by Binance for its anti-money laundering failings. Clearly the exchange has failed to address (at least until recently) the fact that it is facilitating gross amounts of money laundering. 

Whilst the forced change of CEO - with it now being Richard Teng – possibly being the catalyst to address these failings, this will not undo the damage already done. Binance now faces an uphill challenge to not only alleviate the damage caused by its historic failings but also to ingratiate itself as the biggest player in the market whilst also promoting financial safety for its users. 

Given the size of the company, it is a surprise to many that Binance has not taken a proactive approach in working with regulators on a national level - to not only implement the current regulations but also to have a hand in shaping the way forward. 

In light of the recent fines and criminal charges brought against the company and its directors, it is hard to see how Binance can continue to operate in the same manner which it has done historically. Its opaque corporate structure and desire to operate in the shadows will only have caused greater scrutiny of the company from the regulators. 

It is hoped that other exchanges will have implemented processes to comply with national regulations. In reality, however, not all exchanges will have done so. But it is clear that regulators globally are now becoming aware of the extent to which laundered money is passing through these exchanges. And they are taking proactive steps to combat this. Little can now be done for instances of historic facilitation of money laundering. But scrutiny - and ultimately the repercussions - of future failings are only going to become more severe. 

A key focus for many regulators is ensuring exchanges acquire adequate KYC information from the outset for each user. However, simply knowing the identity of the account holder will not be sufficient. Whilst it is easy to draw comparisons with traditional financial systems, it is advisable for exchanges to have thorough systems in place to identify the source of income and assets and to assess whether there is the risk of this stemming from illicit activity. Furthermore, as a bare minimum, high-value transactions must be vetted to ensure they are not linked to money laundering. 

The benefit that crypto has over traditional financial systems is that it has complex and innovative technology at its core. Exchanges must lean on this technology to ensure they are complying with their regulatory obligations.

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Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.

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