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Binance seeks the setting aside of a $4.4 million fine

Author: Syedur Rahman  25 June 2024
2 min read

Syed Rahman outlines the latest developments in the exchange’s Canadian case.

Binance has asked a Canadian court to set aside the $4.4 million fine that was imposed on the crypto exchange for alleged anti-money laundering failures in the country. 

Binance filed an appeal at the Federal Court of Canada in Toronto against the administrative penalty imposed on it by the Financial Transactions and Reports Analysis Centre of Canada (Fintrac) in May. It is arguing that its business activities in Canada have never fallen within the scope of the country’s anti-money laundering rules.

Fintrac fined Binance for failing to register with the financial intelligence unit and for not reporting 5,902 virtual currency transactions worth over C$10,000 ($7,320) that took place on the exchange between 2021 and 2023.

But Binance is arguing that it did not need to register with Fintrac as a “foreign money services business” because it did not market its services to Canadian clients, and  so also did not need to submit transaction reports.

Binance has also claimed that Fintrac’s administrative action should be time-barred as Fintrac should have been aware of the company’s alleged activities in Canada since 2021. Canada’s anti-money laundering law requires Fintrac to start enforcement proceedings within two years of discovering the misconduct.

Binance no longer operates in Canada. It shut down its operations there last year, blaming Canada’s tightened crypto regulations. It has said in its appeal that it took steps to block access to its platforms for Ontario residents in 2022 and extended this to the rest of Canada a year later; using geoblocking technology and listing Canada as a “restricted jurisdiction” in its terms of use.  Canadian residents were prevented from opening new accounts or trading in existing accounts and Binance’s eligibility criteria was updated to exclude all Canadian residents.

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 laws. The then Binance CEO Changpeng Zhao pleaded guilty to failing to maintain adequate anti-money laundering protections, agreed to pay a $150 million fine and resigned from his role at the company. He has since been sentenced to four months in prison.

Bold

This latest action could be seen as a bold move by Binance. Appealing a penalty imposed by a regulatory body is always a delicate process. And appealing a decision whereby a regulatory body has found Binance guilty of breaching money laundering offences only highlights the suggestion that the exchange was promoting operations that fly close to the sun when it comes to criminal activity. 

But, in effect, Binance has a free punt here. It has ceased operations in Canada and so local perception of the company will not necessarily be a cause for concern. Yet this situation is a stark reminder of many people’s fears that tightened regulations will deter companies from operating in certain jurisdictions and, ultimately, limit consumers’ access to the crypto market. 

The impact this action could have on the Canadian regulatory sphere could, however, play a part in combatting this fear. If Binance is correct in its assertion that its services did not fall under the “foreign money service business” definition, this may provide a loophole for similar crypto exchanges to operate in the jurisdiction.

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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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